Japan's Manufacturing Sector Continues Contraction in December 2025

Slowing Contraction Rate

Japan's manufacturing sector remained in contraction territory during December 2025, according to a private sector survey. While still in negative territory, the rate of contraction slowed compared to previous months. This marginal improvement offers some respite for Japan's economy as it heads into the final weeks of the year.

Services Sector Loses Momentum

The services sector, which had been a relative bright spot in the Japanese economy, began to show signs of losing momentum in December. This development adds pressure on the overall economy as it approaches year-end. The slowdown in services could potentially offset some of the positive impacts from the slowing manufacturing contraction.

Business Confidence Outlook

Looking ahead to 2026, business confidence remained relatively strong although lower than the previous month. The manufacturing sector showed particularly weakened confidence, reflecting ongoing challenges in the global economic environment. Despite this, overall business sentiment remained positive, suggesting some resilience in the Japanese economy.

The combination of these factors creates a complex outlook for Japan's economic performance in early 2026. While the manufacturing sector continues to face challenges, the overall business confidence suggests some underlying strength that could help navigate the current difficulties.