Japanese manufacturing activity contracted this month for the first time in two-and-a-half years, as factories cut output amid shrinking domestic and export orders, a private business survey showed yesterday.
The survey also showed business confidence in Japan soured for the first time in more than six years, highlighting the growing toll that the US-China trade spat is inflicting on Asia’s export-reliant economies and global manufacturing.
The Flash Markit/Nikkei Japan Manufacturing Purchasing Managers’ Index (PMI) this month fell to a seasonally adjusted 48.5 from a final 50.3 in January.
The index fell below the 50-point threshold that separates contraction from expansion for the first time since August 2016.
The pessimistic turn in business sentiment “comes as no surprise given the international headwinds Japanese manufacturers are facing, such as a China slowdown and the global trade cycle losing further steam,” said Joe Hayes, an economist at IHS Markit, which compiles the survey.
“Unless service sector activity can recover from January’s decline, the chance of Japan entering a recession in 2019 looks set to rise,” Hayes said.
The output component of the flash PMI index fell to a preliminary 47 from a final 54.4 in January to show the fastest contraction since May 2016.
Indicators of future activity were equally grim.
Total new orders — domestic and foreign — pointed to a sharper decline in demand than the previous month. Although export orders contracted at a slightly slower pace, it is unlikely to ease doubts about the outlook for overseas demand.
Companies also reduced their purchases of raw materials and other inputs for the second month running.
The PMI survey comes one day after government data showed Japan’s exports fell the most in more than two years in January as China-bound shipments tumbled.
Global trade has slowed over the past year as Washington and Beijing ramped up tariffs on each others’ goods, disrupting supply chains worldwide. At the same time, economic activity has been weakening noticeably in China and Europe.
Japan could face further weakness if the US and China do not quickly resolve their differences over trade, some economists say.
Negotiators from both sides are racing to beat a Friday next week deadline for a deal, although US President Donald Trump has said that could be extended if an agreement appeared close.
Japan’s economy bounced back in the fourth quarter last year as business and consumer spending recovered from the effect of natural disasters, but trade frictions and a proposed sales tax hike are expected to hinder growth this year.
POOR INTERNAL CONTROLS: Insurance Bureau Director-General Shih Chiung-hwa said the company is expected to get back on track while its chairman is suspended The Financial Supervisory Commission (FSC) yesterday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$939,415) for a reckless investment that endangered its solvency, and suspended its chairman Eugene Wu (吳東進) for poor supervision. The penalty is the second-highest in a single case after Nan Shan Life Insurance Co (南山人壽) was fined NT$30 million in September last year and its chairman Du Ying-tzyong (杜英宗) suspended for two years, the commission said. In three rounds of special and regular examinations conducted since last year, the commission found that Shin Kong Life had given too much power to an asset and liability management committee
Nano-X Imaging Ltd, a start-up founded by Israeli investor Ran Poliakine, is joining forces with South Korean chipmaker SK Hynix Inc to build a machine that could disrupt a century-old X-ray industry. Valued at about US$2 billion after listing on the NASDAQ last month, Nano-X is seeking to transform a multibillion-dollar industry that has essentially relied on the same technology since Nobel Prize in Physics winner Wilhelm Roentgen discovered X-rays in the late 19th century. Nano-X’s device uses semiconductors instead of metal filaments to generate X-rays. The backing of SK Hynix, the world’s second-largest maker of memory chips, is a boost for
Continental AG, which makes control units for Daimler AG cars, cannot pursue antitrust claims against a group of patent owners, including Qualcomm Inc, which are seeking royalties on telecommunications technology, a federal judge in Texas ruled. Avanci LLC, a licensing pool formed by Qualcomm, Nokia Oyj, Sharp Corp and other owners of patents on technology standards, is not breaching antitrust laws when it negotiates license agreements with automakers rather than the component makers, Barbara Lynn, chief district judge for the Northern District of Texas, said in dismissing the suit in a decision posted on Friday. The licensing group charges US$15 per vehicle
Sony Corp has cut its estimated Play Station 5 (PS5) production for this fiscal year by 4 million units, down to about 11 million, following production issues with its custom-designed system-on-chip (SOC) for the new console, people familiar with the matter said. The Tokyo-based electronics giant in July boosted orders with suppliers in anticipation of heightened demand for gaming in the holiday season and beyond, as people spend more time at home due to the COVID-19 pandemic. However, the company has come up against manufacturing issues, such as production yields as low as 50 percent for its SOC, which have cut into
RSS