Japan composite PMI rises to 53.1 as war related cost pressures persist

Japan’s flash July composite PMI rose to 53.1 from 52.8, a five-month high and the 16th straight month of expansion, signaling firmer private-sector growth. The improvement was driven by a surge in manufacturing output, which posted its fastest rise since 2014, while services slowed modestly. However, the report also highlighted persistent inflation pressures from higher input costs tied to Middle East-related energy and supply-chain disruptions, with services firms raising prices at the fastest pace in more than 12 years. The data supports a stronger growth backdrop for Japan but complicates the Bank of Japan’s policy outlook by keeping inflation concerns elevated ahead of next week’s meeting. Market reaction was dominated by broader risk-off sentiment: the Nikkei fell about 2% and South Korea’s Kospi about 3% as oil-driven geopolitical worries outweighed the domestic economic surprise.