Japanese Manufacturing Activity Shrinks Less Than Expected

Investing.com– Japanese manufacturing activity shrank slightly less than expected in early December, according to purchasing managers index data released on Monday. Meanwhile, services sector activity saw a significant increase.

The au Jibun Bank Japan manufacturing PMI registered at 49.5 in the first two weeks of December, surpassing expectations of 49.2 and showing an improvement from the previous month’s 49.0. A PMI reading below 50 indicates contraction, marking the sixth consecutive month of shrinkage for manufacturing.

Japan's manufacturing sector faced difficulties due to major carmaker outages amid a growing safety scandal, though production by companies like Toyota Motor has been gradually recovering in recent months. Despite this, sluggish overseas demand, particularly from key markets in China and the U.S. remains a concern.

This situation may worsen due to increased trade tariffs under U.S. President-elect Donald Trump. Conversely, local spending trends remain positive, with the au Jibun Bank Japan Services PMI rising to 51.4 in December from 50.5 the prior month, indicating progress into expansion territory.

Increased demand towards the year-end holiday season and strong wage growth bolstered private spending. The growth in the services sector contributed to the overall expansion of Japanese business activity in December, although manufacturing continued to present challenges.