FINWIRES · TerminalLIVE
FINWIRES

Japan Services Activity Hits 11-Month Low as Middle East Conflict Drives Input Costs to One-Year High

By

Japan's service sector growth slowed to an 11-month low in April as rising costs and weaker demand weighed on activity, while companies raised prices at one of the fastest rates on record, adding to concerns over mounting inflationary pressure ahead of a possible Bank of Japan rate increase.

The au Jibun Bank Japan Services PMI business activity index fell to 51 in April from 53.4 in March, marking the weakest expansion since May 2025, according to data compiled by S&P Global Market Intelligence. A reading above 50 indicates growth.

New business growth also softened to the slowest pace since October, while export demand contracted for the first time in five months as uncertainty linked to the Middle East conflict and elevated prices weighed on overseas sales.

At the same time, input costs rose at the fastest rate in a year, driven largely by higher fuel and import expenses tied to the conflict and a weaker yen. Companies passed those costs on to customers, pushing selling prices to the third-steepest increase since the survey began in 2007.

The broader composite PMI, which combines manufacturing and services activity, eased to 52.2 from 53, though manufacturing output expanded at the fastest pace in more than 12 years amid front-loaded demand.

"Underlying data indicated that the slowdown stemmed from more subdued growth across the service sector, as manufacturers reported the quickest rise in output in over 12 years amid reports of front-loading due to the

war in the Middle East," said S&P Global Market Intelligence's Economics Associate Director Annabel Fiddes.

The data adds to signs that Japan's economy is entering a more difficult phase for policymakers, with slowing activity coinciding with persistent inflation pressure.

"The business mood continued to be dampened by lingering uncertainty over the war and the possibility of future price hikes and softer customer demand. Notably, optimism around the year-ahead slipped to the lowest

since the COVID-19 pandemic in August 2020," Fiddes added.

Separate government data showed real wages in March rose 1% from a year earlier for a third straight monthly increase, while nominal wages climbed 2.7% to 317,254 yen. However, wage gains continued to lag inflation, with consumer prices rising 1.6%.

The combination of softer services demand and accelerating price pressures could complicate the Bank of Japan's policy outlook as markets increasingly price in a possible rate increase in June. The central bank kept interest rates unchanged in April but warned that inflation could overshoot expectations as companies continue shifting toward higher wages and prices.

Related Articles

US Markets

BOJ Minutes Show Growing Support for Rate Hikes Amid Iran Oil Shock

Bank of Japan policymakers discussed the need for further interest rate increases if oil price shocks from the Iran conflict become prolonged and feed into broader inflation, minutes from the bank's March 18-19 meeting showed Thursday.The March meeting was the BOJ's first policy gathering after the U.S.-Israeli strikes on Iran in late February. The board kept its short-term policy rate unchanged at 0.75% but maintained a tightening bias as surging oil prices added to inflation pressure from the weak yen.Several members warned the central bank could not ignore the risk that higher energy costs may lift inflation expectations and encourage companies to continue passing on rising costs. One policymaker called for raising rates "without long intervals," while another said the BOJ should tighten policy "without hesitation" if the economy remained resilient despite the Middle East conflict.The minutes showed many members viewed the oil shock as temporary and said the BOJ should largely look through short-term supply-driven price increases. But policymakers also warned that a prolonged conflict could trigger second-round effects on underlying inflation, requiring a monetary policy response.The discussion reflected the BOJ's growing concern over upside inflation risks. Governor Kazuo Ueda said after the March meeting that policymakers were paying closer attention to inflation risks than downside risks to growth, while warning that rising crude prices and yen weakness could push prices higher than expected.The hawkish tone strengthened further at the BOJ's April 29-30 meeting, when three of nine board members proposed raising rates to 1.0%, the largest number of dissents since 2016. The central bank also sharply raised its inflation forecasts and warned firms were becoming more willing to pass on higher costs."While the BOJ kept rates on hold, the three dissenting votes highlight the tensions monetary officials face," Fred Neumann, chief Asia economist at HSBC in Hong Kong, was quoted by Reuters as saying after the April meeting."Given elevated inflation expectations in Japan, which have increased further due to the energy crisis, the BOJ will need to raise interest ​rates in due course to prevent price pressures from building further," Neumann added.

Nikkei 225
US Markets

Nasdaq, S&P 500 Hit New Highs as Iran Deal Prospects Brighten

The Nasdaq Composite and the S&P 500 climbed to new peaks and oil prices tumbled on Wednesday following reports about the US and Iran nearing a potential peace agreement.The Nasdaq Composite rose 2% to 25,838.9, while the S&P 500 advanced 1.5% to 7,365.1, recording their highest close ever and biggest one-day percentage gains since April 8. The Dow Jones Industrial Average gained 1.2% to settle at 49,910.6.Barring energy and utilities, all sectors ended in the green, led by industrials and technology, which gained 2.6% each.West Texas Intermediate crude was last down 6.9% at $95.20 per barrel, while Brent slumped 7.7% to $101.40.American and Iranian officials are close to a one-page memorandum of understanding to end the war and establish a framework for nuclear negotiations, Axios reported Wednesday, citing sources."A deal announcement would move futures further immediately, in fact even the potential of a deal is already triggering a decline in oil prices," Rystad Energy Chief Oil Analyst Paola Rodriguez-Masiu said in remarks emailed to.The physical market's recovery won't be as quick as the futures market predicts, Rodriguez-Masiu said, pointing to a six-to-eight-week lag between the strait reopening and oil flows normalizing.US President Donald Trump said the US has had "very good talks" with Iran over the past 24 hours, but there is no deadline on when he expects Tehran to respond to a US proposal to end the war, CNN reported.Trump warned that Iran's failure to agree to a deal would trigger a powerful military operation, according to his social media post from earlier in the day.Iran said it was reviewing the latest US proposal, according to news reports.US Treasury yields were lower, with the 10-year rate down 7.8 basis points at 4.35% and the two-year rate falling 7.4 basis points to 3.88%.In company news, Advanced Micro Devices (AMD) shares surged nearly 19%, among the best performers on the S&P 500.Late Tuesday, the chipmaker reported stronger-than-expected first-quarter results as demand for artificial intelligence infrastructure pushed data center revenue higher year over year.Advanced Micro Devices is expected to capture about half of the total addressable market for server central processing units, which the company expects will exceed $120 billion by 2030, BofA Securities said.Walt Disney's (DIS) fiscal second-quarter results came in ahead of market estimates Wednesday amid revenue gains across all business operations, while the media and entertainment giant reiterated its expectations for growth to accelerate in the second half. Disney's shares climbed 7.5%, the top performer on the Dow.Nvidia (NVDA) followed Disney on the Dow, up 5.8%. Specialty glass maker Corning (GLW) will boost its optical connectivity manufacturing capacity under a multiyear partnership with the chipmaking giant to support AI factory buildouts. Corning shares jumped 12%.Arista Networks (ANET) shares tumbled nearly 14%, among the worst S&P 500 performers. Late Tuesday, the cloud networking company issued a second-quarter revenue outlook slightly below market estimates.In economic news, employment in the US private sector grew at its fastest pace in more than a year in April, ADP (ADP) data showed."The uptick in private payroll gains from the ADP employment report not only suggests a stable labor market, but one that was potentially warming despite the outbreak of the war in Iran," Oxford Economics said in a note. "If this signal is echoed in the official measure on Friday, the unemployment rate is likely to fall given the low break-even rate, which we estimate is near zero."Data from the Bureau of Labor Statistics are expected to show Friday that the US economy added 65,000 nonfarm jobs last month, which would represent a fall from a 178,000 increase reported for March, according to a Bloomberg-compiled survey. The unemployment rate is seen unchanged at 4.3%.St. Louis Fed President Alberto Musalem said Wednesday that risks have shifted toward higher inflation."We have risks both on the employment side and on the inflation side," Musalem said at a Mississippi Bankers Association event, according to a Reuters report. "In my understanding risks have been shifting towards ... the inflation side."Gold rose 3.1% to $4,708.50 per troy ounce, while silver climbed 6.1% to $78.05 per ounce.

Dow JonesNasdaq CompositeS&P 500$ADP$AMD$ANET$DIS$GLW$NVDA
US Markets

DoorDash Tops First-Quarter Earnings Estimates Amid Record Membership Sign-Ups

DoorDash (DASH) late Wednesday reported first-quarter earnings ahead of Wall Street's estimates as the food delivery company achieved record membership sign-ups.Earnings per share fell to $0.42 during the March quarter from $0.44 a year earlier, while revenue advanced 33% to $4.04 billion. Analysts polled by FactSet expected EPS of $0.36 on revenue of $4.15 billion.DoorDash's shares surged 12% in after-hours activity. The stock is down about 26% since the start of the year through Wednesday's close."In (first quarter) 2026, continued product improvements and healthy consumer demand trends helped drive record membership signups, a new high for monthly active users, and strong consumer engagement across our marketplaces," the company said in a statement.Growth in DashPass members in the US accelerated, buoyed by sign-ups and reduced churn, according to the company. Internationally, DashPass, Wolt+ and Deliveroo Plus members also grew.DoorDash acquired UK-based food delivery company Deliveroo in October 2025.Marketplace gross order value -- the total value of all orders completed on its marketplaces, including taxes, tips and membership fees -- climbed 37% annually to $31.6 billion, above expectations for $31.50 billion.Orders grew 27% to 933 million, driven by an increase in the number of consumers, DoorDash said. The market was expecting 954.1 million in total orders.DoorDash forecast second-quarter marketplace gross order value between $32.40 billion and $33.40 billion, compared with market expectations of $32.43 billion.

$DASH