Japanese PMI indicates slowing down of private sector, worries arise over Middle East conflict.

The PMI preliminary data released by S&P Global shows that the growth momentum of Japan's private sector cooled down in March amidst the uncertainty caused by the Middle East war, weakening the solid start to 2026. New orders and employment situation weakened, and business confidence for the next year slipped to its lowest level in nearly a year. Annabel Fiddes, of S&P Global Market Intelligence, suggests that this coincides with the outbreak of the war, as reports indicate difficulties in the supply chain and rising fuel prices, leading to a significant increase in input costs. The weakening Japanese yen exchange rate and rising labor costs have increased expenses, further squeezing company profit margins. As a result of the war, business confidence in output has decreased, with service sector companies appearing more pessimistic than manufacturers, who hope that demand in industries such as AI and defense will continue to drive growth.