Japan’s Factory Sector Shows Improvement as PMI Indicates Slowdown in Contraction

A recent business survey revealed that Japan’s factory activity experienced a contraction in April but showed signs of nearing the break-even point, indicating a potential upturn in the key sector following a period of sluggishness.

The au Jibun Bank flash Japan Manufacturing Purchasing Managers’ Index (PMI) increased to 49.9 in April from 48.2 in March. Although it remained below the critical 50.0 threshold that distinguishes between growth and contraction for the 11th consecutive month, the index was closest to the break-even level since entering a contraction phase in June.

Jingyi Pan, the Economics Associate Director at S&P Global Market Intelligence, noted that while the service sector continued to drive growth, there was a positive trend in easing the decline in manufacturing output in April.

The subindexes for production and new orders, which are pivotal components influencing the headline figure, contracted at a slower pace, marking the least decline in six and 10 months, respectively.

Additionally, the survey revealed improvements in manufacturers’ confidence and employment growth, while an escalation in input cost inflation led to a surge in average output prices at the highest rate in nine months.

The survey also demonstrated an acceleration in the expansion of Japan’s service sector in April, underscoring its resilience in supporting growth for the country.

The au Jibun Bank flash Services PMI increased to 54.6 in April, the highest level recorded since May last year. A notable aspect was the subindex for new business, which reported the most rapid expansion in 10 months, contributing significantly to overall growth.

The research also indicated that more service providers passed on increased costs to customers, resulting in selling prices rising to the highest level in a decade.

Furthermore, the au Jibun Bank flash Japan Composite PMI, amalgamating both manufacturing and service sector activity, surged to 52.6 in April, matching the peak level observed in August.