Japanese manufacturing activity increased at a faster rate, powered by an rise in orders and output on the back of improved external as well as domestic demand during the month of March. The final au Jibun Bank Japan Manufacturing PMI rose to 52.7 during March, up from 51.4 in February and holding above the 50-threshold indicating expansion.

March’s reading revealed the fastest rate of expansion in Japan’s manufacturing sector seen since October 2018. The surge was supported by an increase in manufacturing output for the second consecutive month as companies saw increased demand from both domestic and external consumers on the back of the coronavirus crisis receding momentarily.

However, the pace of increase in overseas orders slowed down since February even as most of the external demand came from Asian trade partners such as China and South Korea. However, firms remain pressured by an uptick in input costs which rose at the fastest pace in over two years.

Economist at IHS Markit, Usamah Bhatti, observes, “Japanese manufacturers were confident that output would continue to rise over the coming 12 months. Firms cited hopes that a successful vaccination rollout which began in March would help to bring a quicker end to the pandemic and allow for a broad-based recovery in demand.”