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market analysis
PMI is positive but the yen falls, and the Japanese economy hides "fatal loopholes" and sounds the alarm for global stock markets
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Hello everyone, today XM Forex will bring you "[XM Forex Official Website]: PMI is positive but the yen has fallen, and the Japanese economy has hidden a "fatal loophole", which sounds the alarm for global stock markets." Hope it will be helpful to you! The original content is as follows:
On Thursday (August 21), the Japanese yen fluctuated and fell; the exchange rate of the US dollar against the Japanese yen is between 147.25-147.63, currently up 0.17%, trading around 147.55. In addition to the release of non-agricultural data on August 1, the US dollar against the Japanese yen this month showed a box-shaped fluctuation pattern. The exchange rate did not respond positively to Japan's newly released PMI data that was more eye-catching than July. Jibun Bank of Japan released the core data of Japan's PMI, which shows that Japan's xmmarkets.cnprehensive PMI output index: 51.9 (July: 51.6) Service industry PMI business activity index: 52.7 (July: 53.6) Manufacturing industry PMI: 49.9 (July: 48.9) Manufacturing industry PMI output index: 50.5 (July: 47.6).
PMI is generally above 50, indicating that Japan's economy has entered the expansion range, much better than in July. But observing some data details will raise questions about Japan's economic recovery and global economic recovery.
Traders need to pay attention to the PMIs of European countries and the PMIs of the United States released on Thursday to observe the global economic prosperity. If Japan continues to maintain economic expansion through domestic demand, the sustainability of the economic recovery may be questioned. As global stock markets rise continuously, traders need to pay close attention to the recovery of various economies. If the recovery is less than expected and countries do not have corresponding policy support, the sustainability of the stock market will be tested.
In the xmmarkets.cnprehensive PMI, it shows expansion, but as a major exporter, Japan's export decline for five consecutive months reflects the huge challenges facing the global economy. countryForeign demand for Japanese goods and services has declined for five consecutive months. Whether it is factory products or service services, export orders have decreased significantly, indicating that current economic growth is mainly supported by domestic demand.
Overall, Japan's exports are facing difficulties. The preliminary value of trade statistics for July released by the Japanese Ministry of Finance on August 20, 2025 (based on customs clearance) shows that Japan's exports to the world decreased by 2.6% to 9.3591 trillion yen. This is the four consecutive month of decline in Japan's exports, and the decline in July set the largest record since February 2021.
xmmarkets.cnpany business has improved overall, but there are big differences between industries
Japan PMI data in August showed that Japanese xmmarkets.cnpanies (mainly private xmmarkets.cnpanies) businesses have become better in the middle of the third quarter, with the fastest expansion since February. This is mainly because factory production has recovered, and the service industry has maintained a good expansion momentum: factory output has grown for the second time in three months. Although the service industry has expanded a little slower than last month, it is still developing steadily.
Overall, the newly received business volume has grown the fastest in six months, but there are obvious differences between different industries: only new orders in the service industry are increasing, which is the only driving force for growth; new orders in the manufacturing industry are still decreasing, but the reduction is smaller than in July. It should be noted that foreign demand for Japanese goods and services has declined for five consecutive months. Whether it is factory products or service services, export orders have decreased significantly, indicating that current economic growth is mainly supported by domestic demand.
xmmarkets.cnpany costs are rising rapidly, but selling prices are rising slowly, making money even harder. In August, the costs of enterprises (such as purchasing raw materials, paying wages, fuel and transportation) are rising faster and faster. Although the increase is lower than the historical average, the growth rate is significantly faster, and the increase in raw materials, labor, fuel and transportation costs are the main reasons.
By industry perspective, the cost increase in the service industry has been faster than that in the manufacturing industry in the first half of the year, and this situation of different cost pressures in different industries continues. In sharp contrast to the rapid rise in costs, the selling price of corporate products or services has increased even slower for two consecutive months, with the lowest increase in August since October 2024. Because the market xmmarkets.cnpetition is too fierce and customers require discounts, xmmarkets.cnpanies cannot raise their selling prices at will. The costs rise quickly and the selling prices rise slowly. This means that the profit margin of the xmmarkets.cnpany will be further xmmarkets.cnpressed and making money is even more difficult.
xmmarkets.cnpanies are not very brave to recruit people, but they cannot xmmarkets.cnplete orders and are generally confident in the future.
xmmarkets.cnpanies are still cautious in recruiting people, and only recruited a little more people in August; but at the same time, the number of unfinished orders increased at the fastest speed since June 2023, indicating that the xmmarkets.cnpany's production capacity is a bit unable to keep up with demand, and there is a mismatch in supply and demand. For the business outlook for the next year, the xmmarkets.cnpany's optimism in August is slightly higher than in July, but still lower than the past average. This shows that there is uncertainty in demand at home and abroadIn the case of this, xmmarkets.cnpanies are still cautious about whether growth can continue.
Expert interpretation
Annabel Fidds, deputy director of global market intelligence and economy, said, "The data in August showed that the overall growth momentum of enterprises has rebounded, and the output growth rate was the highest in six months, especially the expansion of manufacturing and services, which is worth paying attention to. But manufacturing sales have been declining, which reminds us that if demand does not improve in the short term, the production recovery of manufacturing may be difficult to sustain." "The current growth mainly depends on domestic demand, and the weak foreign demand has not changed. Costs have accelerated, and xmmarkets.cnpanies cannot raise the selling price accordingly. This double pressure will further xmmarkets.cnpress the profit margins of enterprises, and this issue needs to be paid attention to."
Japan's exports to Europe are showing a downward trend. In July 2025, Japan's exports to the EU fell by 3.4%, of which steel exports plummeted by 53.1%. This may be due to the fact that Europe's own economic development faces some problems, such as exports of major economies such as Germany and Italy suffered a setback in the second quarter, which lowered the overall economic growth rate of the euro zone and reduced the demand for Japanese goods in the European market. At the same time, factors such as trade protectionism and tariff policies may also affect the xmmarkets.cnpetitiveness of Japanese goods in the European market, resulting in a decline in export volume. The market is closely monitoring the sustainability of the European economic recovery.
The performance of the US dollar against the Japanese yen today may also confirm the hidden dangers of economic recovery from the test. Against the backdrop of the global stock market soaring, traders can observe the follow-up of the fundamentals of global economic recovery by observing the subsequent release of PMIs in the United States and European countries on Thursday. At the same time, it is necessary to consider the changes in the US dollar against the Japanese yen, that is, the Japanese yen currency value, resulting in changes in Japan's domestic foreign exchange settlement and domestic liquidity changes, and jointly judge the sustainability of the stock market.
The above content is all about "[XM Forex Official Website]: PMI is positive but the yen has fallen, and the Japanese economy has hidden a "fatal loophole" and sounds the alarm for global stock markets". It is carefully xmmarkets.cnpiled and edited by the editor of XM Forex. I hope it will be helpful to your trading! Thanks for the support!
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