Japan PMI Pickup Points to Front-loading Ahead of US Tariff Jump

frc{haqk88n0v9]gd{74{({c_media_dl_1.png S&P Global

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(Bloomberg) — Japan’s manufacturing activity expanded for the first time in more than a year in June in a likely sign of front-loading of output ahead of a scheduled increase in US tariffs next month.

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The au Jibun Bank purchasing managers’ index of manufacturing activity rose to 50.4 from 49.4 in May, crossing the boom-or-bust 50 threshold for its highest reading since May 2024, according to data released Monday by S&P Global. The index for services also increased to 51.5 from 51.0.

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The pickup in manufacturing activity suggests firms are front-loading production for exports before they are affected by heavier US duties. US President Donald Trump’s administration is set to push up so-called reciprocal tariffs on July 9 for many nations after a 90-day period during which they were held at 10%. For Japan that means tariffs will jump to 24% on many exports to the US. Higher sectoral tariffs on steel, aluminum and car shipments to the US are already in place.

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“It seems companies are rushing to boost output before the higher tariffs kick in,” said Kazuki Noda, economist at SMBC Nikko Securities. “We’re seeing a clear improvement in the manufacturing production index even though new orders remain quite weak.”

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While the subindex for new orders showed a stronger decline than the previous month, there were also some positive signs. The uptick in output and resilient services activity may allow Japan to avoid a technical recession following the economy’s contraction in the first quarter, Noda said.

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The PMI report for Japan showed manufacturers projected a 9% increase in output for June while the subindex for new orders showed a stronger decline than the previous month. With the uptick in output, Noda sees Japan avoiding a technical recession following the economy’s contraction in the first quarter.

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The Japanese data follow early export figures from South Korea suggesting front-loading of shipments. Exports to the US expanded 4.3% and helped push up overall growth in shipments to 8.3% in the first 20 days of June, figures released early Monday showed.

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Japanese Prime Minister Shigeru Ishiba and Trump failed to reach a trade deal during last week’s Group of Seven summit in Canada, despite three phone calls between them ahead of their meeting and a flurry of visits to Washington by Ryosei Akazawa, Japan’s chief trade negotiator.

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Akazawa said last week in Tokyo that he would not fixate on the July 9 deadline. US Treasury Secretary Scott Bessent has also suggested that countries engaged in good-faith negotiations may be granted an extension.

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Even if Japan avoids slipping into recession, SMBC’s Noda warned that the outlook for the summer remains increasingly uncertain.

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“The impact of the tariff burden will likely begin to show more clearly from July,” Noda said. “That is likely to become a critical test for the Japanese economy.”

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