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Japan's PMIs in February all fell into contraction, much lower than already anemic expectations. Japanese manufacturing, service and composite PMI® all fell under 50. The business outlook remains pessimistic.

Japan Manufacturing

Japan Jibun Bank / IHS Markit preliminary PMIs for February

  • Manufacturing 47.6 vs. prior 48.8
  • Services 46.7 vs prior 51.0
  • Composite 47.0 vs. prior 50.1

All three now in contraction. The February flash PMI shows Japan's private sector output fellat the fastest pace since April 2014. This was due to the 2014 sales tax hike in March. Survey evidence showed new business at service providers had been hurt by the Coronavirus outbreak said IHS Markit.

 Japan PMI manufacturing and services Feb 2020

.Japan PMI Feb 2020

The Bank of Japan will remain under pressure to hold steady, and even add to, its easing measures.

The downturn is a reflection of weakness both domestically and overseas.

New export business has fallen for most of the year, which firms attributed to challenging economic conditions

Increasing rate of contraction at key trading partners such as China, as well as greater competition internationally.

Stocks of both finished goods and inputs declined amid concern towards heightened tensions over the Coronavirus in China, as well as the uncertainty in Europe with Brexit..

There were no signs a let-up in the recent manufacturing downturn as output and new orders both slipped. Weak demand from Japan’s key trade partner, China, as well as signs of an increasingly sluggish domestic economy, have impacted sales volumes. Sub-sector data also indicated the area where manufacturing softness had hit hardest, with investment goods producers leading the decline in order books. Given the importance of capital goods to Japan’s foreign trade, it would suggest further difficulties lie ahead for Japanese exporters.

Trade tensions between China and the US have slowed with the phase one deal but still y add to existing concerns for manufacturers.

Source: IHS Markit

From The TradersCommunity News Desk

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