Japan’s services sector growth slowed slightly in August, with the S&P Global services PMI easing to 53.1 from 53.6 in July, though still above the 50 mark that signals expansion. The slowdown came as firms shed staff for the first time since September 2023, while foreign demand contracted sharply.

Despite this, strong domestic demand kept growth steady, with new orders rising at the fastest pace since February. However, weaker exports meant the upturn was largely home-driven. Companies reported more resignations, growing workloads, and the steepest increase in backlogs in over two years. Input costs also climbed, but stiff competition limited price hikes, pressuring margins.

Even so, business confidence improved, with firms expecting stronger demand ahead. The services sector helped offset manufacturing weakness, pushing Japan’s composite PMI to 52.0, its highest since February.

Meanwhile, exports in August fell at the steepest pace in more than four years as US tariffs, announced earlier by President Donald Trump, continued to weigh on global trade, clouding Japan’s growth outlook.

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