Japan's economic expansion accelerated in February as the final composite PMI rose to 53.9, the highest level since May 2024. The services sector, which accounts for a significant portion of the economy, saw its PMI climb to 53.8 from 53.7 in January, indicating sustained growth driven by stronger demand. Businesses are increasingly passing higher costs to consumers, reflecting inflationary pressures despite the Bank of Japan's accommodative stance. The data signals resilience in Japan's economic recovery, which could bolster the yen (JPY) against majors like the USD. Traders may anticipate tighter monetary policy if inflation persists, though the BoJ's recent interventions to weaken the yen complicate the outlook. The PMI's strength also highlights Japan's role as a stabilizer in Asia's economic landscape. For global markets, the reading supports expectations of a slower BoJ exit from ultra-loose policy. Investors should monitor upcoming BoJ meetings and inflation data for clues on policy shifts. The USD/JPY pair could face volatility as traders balance growth optimism against currency intervention risks.
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