Japan’s Manufacturing Sector Contracts at Faster Pace During May

Factory activity in Japan contracted at a faster pace in the month of May as output and orders declined on account of the pandemic-led shutdown. The au Jibun Bank Flash Japan Manufacturing PMI fell from a final reading of 41.9 during April to a seasonally adjusted 38.4 during May, indicating deeper contraction in the sector.

The reduction in the PMI reading was driven by a decline in manufacturing output, new orders and backlog of work, all of which contracted at the fastest rate seen in over a decade. On a slightly positive note, however, employment levels remained flat but still remained in contraction.

Japan is expected to face a steep economic recession in the wake of the ongoing coronavirus crisis. According to economist at IHS Markit, Joe Hayes, “While the rate of decline in services activity has eased very slightly, plummeting demand for goods is finally catching up with the manufacturing sector.”

Meanwhile, the services sector in Japan registered a bit of an improvement with the rate of contraction witnessing a slight uptick. The au Jibun Bank Flash Services PMI index rose to a seasonally adjusted 25.3 in May from a final reading of 21.5 in April, but remained well below the 50-threshold indicating contraction. Japan’s composite PMI reading also improved to a seasonally adjusted 27.4 during May from April’s final reading of 25.8.