Wed, 01 Feb 2023

Japanese manufacturing falls to lowest in 2 years

Robert Besser
04 Dec 2022, 14:59 GMT+10

TOKYO, Japan: The results of a survey released this week showed that Japan's manufacturing activity contracted for the first time in nearly two years in November due to drops in demand and output caused by a global economic slowdown and high inflation.

As demand is steadily declining and major trading partner China grapples with a renewed COVID-19 surge, Japan's economy will remain under pressure for some time.

The au Jibun Bank Japan Manufacturing Purchasing Managers' Index fell to a seasonally adjusted 49.0 in November from October's 50.7 final, and below the warning level of 49.4.

This marked the first instance the index fell below the 50-mark, which separates contraction from expansion over 22 months, and was its weakest level since November 2020.

Laura Denman, Economist at S&P Global Market Intelligence, which compiles the survey, said, "Cooling market conditions, sustained cost pressures and weak underlying demand, both domestically and internationally, were reportedly pivotal factors contributing to the declines," as quoted by Reuters.

The survey's subindexes showed that old and new orders slipped to their lowest levels since August 2020, with orders from overseas clients suffering the sharpest decline in 28 months.

The weak yen currency is also driving up import prices and increasing the cost of living, stifling the Japanese economy's recovery from the COVID-19 pandemic.

"Concerns surrounding price pressures also dampened business sentiment, which did weaken slightly from October," Denman added.

However, the survey showed that overall manufacturers' business sentiment remained resilient on expectations for a further improvement in Japan's COVID-19 situation.

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