Japan’s manufacturing sector continued to experience a decline in production midway through the first quarter of 2025, though the pace of contraction moderated compared to previous months, according to data from the au Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI).
The PMI rose slightly to 49.0 in February, up from 48.7 in January, indicating a slower rate of decline in manufacturing activity. The downturn, which has now extended for six consecutive months, was attributed to weaker demand and subdued confidence in both domestic and international markets, according to a report from S&P Global Ratings.
New orders and production levels remained lower, with businesses citing reduced client demand and excess inventories as contributing factors. While business conditions showed slight improvement in the consumer goods sector, declines continued in the intermediate and investment goods industries.
Employment levels were largely stable, while purchasing activity and backlogs of work saw notable reductions. Input costs continued to rise at a robust pace, marking one of the sharpest increases since August 2024. In response, manufacturers adjusted their selling prices upward.
Export demand remained weak, with survey respondents highlighting softened demand from key markets, including the United States and China. The decline in new export business was slightly more pronounced in February compared to previous months.
Despite ongoing challenges, the slower rate of contraction suggests that some stabilization may be underway within the sector. However, businesses remain cautious as they navigate evolving market conditions.
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