Japan’s manufacturing sector suffers as exports stall

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Japan Manufacturing

Japan’s manufacturing activity has slowed down for the second straight month in July – a seemingly direct impact of the fact that exports have stalled.

The Markit/Nikkei Japan Flash Manufacturing Purchasing Managers Index (PMI) fell to 52.2 in July – numbers that are lowest in eight-months. Despite the decline in PMI, it is well above the 50 threshold that separates expansion from contraction for the 11th consecutive month.

According to economists, the decline in PMI and the slow down in the manufacturing sector in the country is a direct result of export order stagnation owing to weaker demand from South East Asia markets. Despite the slow down, jobs have increased in the manufacturing sector.

The preliminary index for new export orders fell to 50.0 from 53.4 in June. The output component fell to 51.4 from a final 52.2 in June. On the positive side, the employment index rose to a preliminary 53.4 from 53.2 in the previous month.

The index measuring expectations for future output also rose to a preliminary 63.0 in July, which is the highest since Markit began collecting this data almost five years ago.

The Bank of Japan and the government have been upgrading their economic assessments recently due to growing exports, a turnaround in consumer spending and rising capital expenditure.


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Private-sector economists have also expressed more confidence in the economic outlook, but the improving outlook has been slow to translate into the acceleration in inflation that the BOJ is hoping for.

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