Japan's economy in early 2025 is facing a divide, with the manufacturing sector continuing to decline while the services industry thrives. The manufacturing PMI has dropped to 48.8, signaling a 10-month contraction. This downturn is mainly due to lower demand from key trading partners like China and the United States. Meanwhile, the services PMI has risen to 52.7, reflecting growth in areas such as healthcare, retail, and logistics. Despite inflation and rising costs, the services sector remains resilient. The Bank of Japan is expected to raise interest rates in response to inflation, which could affect both consumer spending and economic growth. Overall, Japan's reliance on its services industry is becoming increasingly important as the manufacturing sector struggles to recover.
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