Japan's factory activity moves closer to stabilisation in Dec

TOKYO: Japan's factory activity came within striking distance of stabilisation in December, a private-sector survey showed on Wednesday, even as a resurgence in coronavirus cases is taking a toll on economies globally, particularly in Europe.

The slower decline in manufacturing will likely boost policymakers' confidence that Japan's export-oriented economy is able to pull through the crisis even as the services sector takes a heavy hit from a worsening flare-up in COVID-19 infections.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) rose to a seasonally adjusted 49.7 from a final 49.0 in November, shrinking at the slowest pace in 19 months.

The headline index came within reach of the 50.0 threshold that separates contraction from expansion, largely thanks to reduced contractions in output and new orders as well as a modest improvement of employment conditions.

Private-sector businesses were optimistic that conditions would improve in the year ahead despite short-term challenges posed by a COVID-19 resurgence, said Usamah Bhatti, economist at IHS Markit, which compiles the survey.

"Positive sentiment stemmed from the expectation that there would be an end to the pandemic which would fuel both domestic and international demand," he said.

Japan's government last week announced a $708 billion economic stimulus package to help aide an economic recovery through boosting investment in new growth areas such as green and digital innovation.

The government unveiled the package, which will include roughly 40 trillion yen ($384.43 billion) in direct fiscal spending, shortly after revised data showed the economy in the third quarter rebounded from a record postwar slump in April-June.

The PMI survey also showed a faster decrease in services-sector activity, with the au Jibun Bank Flash Services PMI index falling to a three-month low of 47.2 on a seasonally adjusted basis from November's final of 47.8.

The au Jibun Bank Flash Japan Composite PMI, which is calculated using both manufacturing and services, stood at 48.0 in December, in line with the previous month's final of 48.1.