Japan’s Manufacturing Activity Posted Sharpest Decline in December Over 2 Years

Japan’s manufacturing activity posted a sharpest decline in December in 26 months, according to a business survey, with companies seeing further declines amid a global economic slowdown.

The Au Jibun Bank Japan manufacturing purchasing managers’ index edged lower to a seasonally adjusted 48.9 in December from November’s final 49.

The reading was the weakest since October 2020 and marked the second month below the 50-line that separates contraction from expansion, even though it was just slightly higher than the flash figure of 48.8.

“The downturn was largely centred around the current demand environment which is weak both internationally and domestically,” Laura Denman, economist at S&P Global Market Intelligence, was quoted as saying.

According to the survey’s subindexes, output and new orders extended their contraction for a sixth month in December, yet at slower paces than last month.

Manufacturers were expecting a further downturn in their business conditions, with the subindex of future output hitting the lowest since May, when China’s Covid lockdowns disrupted the supply chains for Japanese companies.

The survey corroborates the weak factory output data released last week that showed contraction for a third month in November.

While the survey showed input price inflation was cooling to a 15-month low, indicating easing cost pressures, the rest of the results pointed to darker prospects for Japan Inc in early 2023.

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