Japan’s Factory Activity in December

TOKYO (Reuters) – Japan’s factory activity shrank at a slower pace in December as declines in production and new orders eased, according to a private-sector survey released on Monday, edging closer to stabilization following recent falls.

The final au Jibun Bank Japan manufacturing purchasing managers’ index (PMI) rose to 49.6 in December, indicating the softest contraction in three months. This index was slightly higher than 49.5 in the flash reading and 49.0 in November, yet it remained below the 50.0 threshold that separates growth from contraction for the sixth consecutive month.

“The headline reading moved closer to neutrality amid softer reductions in both production and new order intakes,” stated Usamah Bhatti at S&P Global Market Intelligence, which compiled the survey.

The subindex of production shrank for a fourth straight month in December; however, the contraction was slower compared to the previous month. Manufacturers cited subdued new orders as the primary factor behind the decline in output.

New orders have contracted for the 19th straight month due to weak demand in both domestic and key overseas markets. Some firms in the survey noted that the semiconductor market contributed to the weakness in new orders.

Employment expanded in December, reversing the decline seen in November, reaching its highest level since April. Surveyed firms reported hiring more workers due to labor shortages and to prepare for anticipated future demand.

Input prices grew at their strongest pace since August, with companies pointing to higher costs for raw materials and labor. The weak yen also contributed to inflation. In response to the rising prices, firms raised their output prices at the fastest rate in five months.

Manufacturers expressed confidence regarding their outlook, expecting business expansion due to the launch and mass production of new products.