Japan factory PMI slips to 53.3, a seven-month low, as cost pressures pick up

The survey keeps Japan’s factory sector in solid expansion while showing price pressure starting to build again, which supports the case for continued policy normalisation by the Bank of Japan. Stronger input inflation linked partly to oil, together with hiring close to its fastest pace in years and rising backlogs, points to a tight goods sector rather than a weakening one. For the yen, the data lean modestly supportive if they reinforce expectations of tighter policy. Semiconductor-related demand remains the key growth driver, so Japanese chip and equipment stocks remain exposed to any shift in the AI investment cycle. Higher energy costs tied to the Middle East war are an upside risk to Japan’s goods inflation.