Japan’s manufacturing activity hits 3-year low

Japan’s industrial sector activity is declining at its lowest level in three years, a downbeat statement that Bank of Japan officials must consider when they meet to decide on monetary policy next week.

The purchasing managers’ index issued by Au Jibun Bank on the activity of the manufacturing sector fell to 47.7 points in December, the lowest level since February and the same as in September 2020, when the economy began to recover from the damage of the pandemic.

The index has fallen below the 50-point level, separating contraction from expansion, for seven consecutive months.

The services sector’s reading rose to 52 points, helping to boost the composite index to 50.4.

The data show the constant disparity between the conditions in the industry and service sectors.

The Bank of Japan’s recent Tankan survey showed that sentiment towards non-industrial companies rose to a 32-year high, with companies providing accommodation, food, and beverage services benefiting from high inbound tourism and high demand for luxury in the aftermath of the pandemic.

Manufacturers were less optimistic, with domestic demand declining, inter alia, because of the continuing impact of inflation on spending patterns.