Japan’s Factory Activity Sees Glimmer of Hope
As the year drew to a close, Japan’s manufacturing sector showed signs of stabilization, with a slower pace of contraction in December. According to a private-sector survey, the au Jibun Bank Japan manufacturing purchasing managers’ index (PMI) rose to 49.6, indicating the softest decline in three months.
Production and New Orders See Easing Decline
The survey revealed that declines in production and new orders eased, with the subindex of production shrinking for a fourth straight month, but at a slower rate than last month. Manufacturers attributed the decline in output to subdued new orders, which contracted for the 19th straight month due to weak demand in both domestic and key overseas markets. The semiconductor market was cited as a key factor behind the weakness in new orders.
Employment Sees Uptick
In a positive development, employment expanded in December, reversing its fall in November, to reach its highest level since April. Firms hired more workers to address labour shortages and prepare for future demand.
Rising Input Prices and Output Prices
Input prices grew at the strongest pace since August, driven by higher costs of raw materials and labour. The weak yen also contributed to inflationary pressures. To cope with rising prices, firms raised their output prices at the fastest rate in five months.
Manufacturers Remain Confident
Despite the challenges, manufacturers remained optimistic about their outlook, expecting business to expand thanks to the launch and mass production of new products. This confidence is crucial for Japan’s economic growth, as the manufacturing sector plays a vital role in the country’s economy.
A Step Towards Recovery
While Japan’s factory activity is still in contraction territory, the latest survey suggests that the sector is moving closer to stabilization. As manufacturers adapt to changing market conditions and invest in new products, there is hope for a stronger recovery in the coming months.
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