Japan's service sector maintained its growth trajectory in August 2025, driven by strong domestic demand, according to S&P Global PMI data. Despite a slight dip in the overall service business activity index from July, it remained above the neutral 50.0 mark, marking the fifth consecutive month of expansion. However, challenges such as rising cost pressures and increased competition have constrained pricing power, impacting profit margins. Employment in the service sector also faced setbacks, with staff numbers declining for the first time in nearly two years. Annabel Fiddes, Associate Director of Economics at S&P Global Market Intelligence, highlighted these issues while noting that manufacturing continues to lag, though overall GDP performance in the third quarter remains strong.