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.---Earlier:Japan weighs ¥5,000 annual payment for low-income workers under new benefit plan---Japan’s factories are still growing at a healthy clip on AI-related chip demand, but they are expanding more slowly and paying more to do it.Summary:The S&P Global Japan Manufacturing PMI fell to 53.3 in October from 54.1, a seven-month low but well above the long-run average of 50.6New orders and output kept rising, supported by semiconductor demand, but at the slowest rates since March; export orders also grew more slowlyEmployment growth stayed close to its fastest pace in eight and a half years, and backlogs of work rose at a faster rateInput price inflation accelerated for the first time in five months on higher oil, raw material and component costs, while output price inflation eased to a six-month lowFirms built up input inventories at the fastest pace in almost four years to guard against further price rises, and optimism rose to an eight-month highJapan’s manufacturing sector kept growing in October, but at a slower pace, as output and new orders expanded at their weakest rates in seven months and cost pressures began to rise again, according to S&P Global survey data released at 0030 GMT on Monday (1930 US Eastern on Sunday).The S&P Global Japan Manufacturing PMI fell to 53.3 from 54.1 in September. That was the lowest reading in seven months, but it remained well above the series’ long-run average of 50.6, which still points to a solid improvement in business conditions.New orders have risen in every month this year, and firms again reported stronger demand in October, particularly from semiconductors and related markets. Export orders also increased. However, growth in both total and overseas orders was the slowest since March. Output rose for a tenth straight month, also at its softest pace since the end of the first quarter, and purchasing activity grew at its slowest rate in six months.The labour market remained strong. Job creation held steady near its fastest pace in eight and a half years, while backlogs of work rose at a faster rate, a sign of some strain on capacity. Business confidence also improved, with optimism about future output reaching an eight-month high.Prices were the main concern. Input cost inflation picked up for the first time in five months, which firms linked to higher prices for oil, raw materials and components. Cost pressures stayed elevated by historical standards but below the highs reached in the second quarter. Factory gate prices kept rising at a rate well above the series average, although that pace slowed to a six-month low.Worries about further cost increases led some manufacturers to build up stocks of inputs. Combined with efforts to meet production needs, that produced the steepest rise in pre-production inventories in almost four years.An economist at S&P Global Market Intelligence said growth had lost some of the momentum seen earlier in the year but remained decent by historical standards, with AI-related demand and growing order books supporting confidence. The economist added that manufacturers continue to show strong pricing power as backlogs grow.The combination of steady hiring, firm pricing and renewed cost pressure suggests Japan’s goods sector remains tight despite the slower growth, a backdrop that will interest policymakers watching for signs of persistent inflation. This article was written by Eamonn Sheridan at investinglive.com.