Manufacturing activity across Japan posted the slowest pace of expansion seen since four months during June, indicating a possible easing of economic recovery in the nation amid the fourth wave of the pandemic. The au Jibun Bank Flash Japan Manufacturing PMI dipped to a seasonally-adjusted 51.5 for June from May’s final reading of 53, although it managed to stay above the 50-threshold pointing to expansion.

The drop was triggered by a sharp fall in manufacturing output, which contracted at the fastest rate seen since November 2020 amid Japan’s restrictions imposed to combat the latest wave of the pandemic. In addition, supply chain woes also exerted pressure on manufacturers, keeping output at lower levels than in previous months.

While total new orders as well as overseas orders remained in expansion through June, the pace of growth has eased lower. On a positive note, however, Japanese manufacturing firms continue to maintain optimism about conditions improving on the back of the COVID-19 vaccine rollout powering economic recovery and removal of restrictions in the coming months.

Economist at IHS Markit, Usamah Bhatti, notes, “One bright note was private sector firms in Japan continued to expand employment levels despite subdued demand conditions. Job creation occurred for the fifth time in as many months as manufacturing firms noted the fastest pace of job creation since January 2020.”