TOKYO: Japan’s manufacturing activity extended declines for nearly a year in May, as factories continued to take a hit from US tariffs on Japanese goods, a business survey showed on Thursday.
While service-sector activity showed some resilience and stayed in expansionary territory, feeble manufacturing performance drove overall Japanese businesses back to contraction.
Japan’s trade envoy is set to have a third round of talks with US officials this week, but it was unclear if there would be a deal to lower the tariffs set by President Donald Trump, which threaten the auto sector and other key industries.
The au Jibun Bank flash Japan manufacturing purchasing managers’ index (PMI) edged up to 49.0 in May from April’s final reading 48.7, but stayed below the 50.0 threshold that separates growth from contraction for the 11th month.
Factory output fell at a quicker pace than in April, while the decreases in new orders and new export business were slower than the previous month.
Cost pressures remained high but showed signs of easing.
Input costs for factories rose at the slowest rate in 14 months, while output price inflation was down to the lowest in nearly four years.
Business confidence among manufacturers improved slightly in May after slipping to the weakest level in nearly five years in April.
Meanwhile, service-sector managers’ sentiment hit the lowest since January 2021 during the COVID-19 pandemic.
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“Uncertainty around the future trade environment and foreign demand” appear to cloud Japanese businesses’ outlook and output projections, said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, which compiled the survey.
The au Jibun Bank flash services PMI was down to 50.8 in May from 52.4 in April, with slower increases in new business, export business and employment.
Given the deterioration in both manufacturing and non-manufacturing activities, the au Jibun Bank flash Japan composite PMI fell to 49.8 in May from 51.2 in April.
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