Japanese manufacturing continues recovery, buoyed by AI demand

Japan's manufacturing sector expanded strongly in August, with the Purchasing Managers' Index (PMI) rising to 54.9 from 54.5 in July, marking its eighth consecutive month of improvement.

This performance was primarily driven by robust demand for semiconductors and artificial intelligence (AI) products, contributing to the fastest growth in new business and export orders since the beginning of 2018, with increased demand from North America, Southeast Asia, and China.

Output, employment, and purchasing activity also rose significantly, while backlogs of work and supply chain disruptions continued to weigh on companies. Meanwhile, input costs remained high due to rising raw material and oil prices and a weak yen, prompting manufacturers to raise selling prices.