Japan Factory Activity Returns to Contraction

The au Jibun Bank Japan Manufacturing PMI unexpectedly dropped to 48.8 in July 2025 from June’s final reading of 50.1, which marked the first time in 13 months that the index exceeded the 50.0 threshold separating expansion from contraction, preliminary estimates showed. The latest figure missed market forecasts of 50.2 and marked the lowest level in three months. The downturn was driven by a renewed decline in output amid lingering uncertainty over US tariff policy and weak demand. New orders continued to fall, with export orders also declining, as businesses adopted a wait-and-see approach in response to ongoing trade tensions. Looking ahead, business sentiment weakened after reaching a five-month high in June, reflecting growing concerns over US tariffs and their potential impact on future demand. US President Trump on Tuesday announced a trade deal with Tokyo that he said would result in Japan investing USD 550 billion into the US and a 15% tariff on imports from Japan.