# Japan’s factory output surges to near 12-year high in July, PMI shows > Source: > Published: 2026-08-03 01:48:24+00:00 # Japan’s factory output surges to near 12-year high in July, PMI shows New orders rose at the fastest pace since January 2022 [TOKYO] Japan’s manufacturing output expanded in July at its fastest pace in more than 12 years, with across-the-board improvements in sub-indexes, including a 4.5-year high surge in new orders buoyed by AI-related demand, a survey showed on Monday (Aug 3). The S&P Global Japan Manufacturing Purchasing Managers’ Index (PMI) came in at 54.5 in July, down slightly from 54.8 in June and the flash reading of 54.7, marking the seventh consecutive month of expansion. A reading above 50.0 indicates expansion, while below that level signals contraction. Manufacturing output grew at the quickest rate since February 2014. New orders rose at the fastest pace since January 2022, with respondents citing strong demand for chips and AI-related manufacturing areas, according to the survey. Specifically, new orders from overseas expanded at the strongest rate in just over five years. Firms reported increased orders from Asia and the United States, the survey showed. Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said: “Companies often commented that the improvement coincided with greater global demand across the key semiconductors industry, while some firms commented on growth in AI-related areas of manufacturing.” Input cost inflation eased to the slowest rate since March, but manufacturers continued to cite higher oil and raw materials prices linked to the Middle East war. The cost pressures prompted companies to raise output prices sharply, although at a slower rate than in June. Notably, purchasing activity expanded at the sharpest pace since April 2022, as firms bought inputs in advance to guard against supply-chain disruption from the uncertain situations in the Middle East. The stock building efforts partly “contributed to the strength of the sector’s performance,” Fiddes said. Business sentiment improved to a four-month high in July, with manufacturers expecting continued demand improvements, particularly for semiconductors, the survey said. REUTERS Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free. Share with us your feedback on BT's products and services