Japan’s factory activity fell at the fastest pace in a year in March, according to a private-sector survey. The au Jibun Bank Japan flash manufacturing purchasing managers’ index dropped to 48.3, signaling contraction for the ninth consecutive month. The service sector also saw a decline, with business activity contracting for the first time in five months.
Factors such as rising costs, labour shortages, an ageing population, subdued client spending, and uncertainty in the global trade environment contributed to the pessimistic outlook among firms. Manufacturers cut back on production and new orders, leading to reduced purchasing activity and inventories. Inflationary pressures remained high, with input costs rising sharply.
The lack of client spending resulted in a contraction in the services sector, with the au Jibun Bank flash services PMI falling to 49.5. The composite PMI, which combines both manufacturing and service sector activity, also contracted to 48.5.
Economics Associate Director Annabel Fiddes noted that concerns over labour shortages, inflation, and uncertainty dampened optimism among businesses. The overall business outlook was the lowest since August 2020, indicating a challenging environment for Japan’s economy.
The data suggests a worrisome trend for Japan’s economy, with both manufacturing and service sectors experiencing declines. With ongoing challenges and uncertainties looming, businesses are facing a tough road ahead in the current economic climate.
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