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Japan PMI Falls as New Orders Decline

PMI fell to a seasonally adjusted 51.6 in July from  a final 53.0 in June.PMI fell to a seasonally adjusted 51.6 in July from  a final 53.0 in June.

Japanese manufacturing activity expanded at the slowest pace in over 1-1/2 years in July, a preliminary private survey showed on Tuesday, in a worrying sign an intensifying global trade war is starting to put the brakes on major exporting economies.

The flash Markit/Nikkei Japan manufacturing purchasing managers index fell to a seasonally adjusted 51.6 in July from a final 53.0 in June, Reuters reported.

The index remained above the 50 threshold that separates expansion from contraction for the 23rd consecutive month but declined to the weakest level since November 2016.

“Flash survey data pointed to a slowing of growth momentum for Japan’s manufacturing sector at the beginning of the third quarter, following a robust performance so far this year,” said Joe Hayes, economist at IHS Markit, which compiles the survey.

“New business grew at a much weaker rate and was broadly flat, while export demand, despite further yen depreciation, deteriorated for a second month running.”

The flash index for new orders fell to 50.1 from a final 52.7 in June to reach the lowest since September 2016.

There wasn’t much encouraging news for new export orders either, which shrank for the second month though the pace of contraction slowed to a preliminary 49.7 from a final 48.9 in June.

Overall, the PMI result portends a darkening outlook as a US-driven international trade war embroils major economies from China to Canada to the eurozone and threatens to dent Japan’s export-oriented manufacturing sector.

Japan’s economy is expected to bounce back from a contraction in the first quarter, but exports could falter and companies forced to cut business investment if the United States seeks concrete measures from Japan to lower its trade surplus.

Meanwhile, Japan held a ministerial meeting on Tuesday on its plan to accept more foreign workers from April to cope with a serious labor crunch.

The plan was approved last month by the government, which wants to submit a bill to revise the nation’s immigration law to an extraordinary Diet session expected to be convened in the autumn.

Before introducing the new system, the government still needs to specify which industries will be eligible to offer foreign nationals menial jobs and beef up measures against potential abuse of the framework.

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