Japan's Service Sector Growth Decelerates in December 2025

Slowing Demand and Cost Pressures

The growth of Japan's service sector slowed to its lowest pace in five months during December 2025, according to the final S&P Global PMI Services Index released on January 7, 2026. The index dropped to 51.6 from 53.2 in November, indicating a continued expansion but at a decelerating rate. While there was some positive note with a recovery in new export orders, overall demand remained weak, reflecting ongoing cost pressures and slower economic activity.

Key Findings from the PMI Survey

• The PMI reading of 51.6 in December marked a significant slowdown from November's 53.2
• New export orders showed some recovery, providing a positive note
• Overall demand weakened, reflecting broader economic pressures
• Cost pressures continued to affect the service sector

Implications for Japan's Economy

The slowdown in service sector growth has implications for Japan's overall economic activity. As the service sector is a significant contributor to the country's GDP, a deceleration here can impact overall economic growth. The continued cost pressures also suggest that businesses are facing challenges that could potentially affect pricing and profitability.