Manufacturing activity in Japan shrinks at the fastest rate in 2 years in November

In November, manufacturing activity in Japan contracted at the fastest pace in two years. According to a business survey, a contraction in the country's manufacturing activity can be explained by the deterioration in demand due to strong inflationary pressure.

The contraction in manufacturing activity marked the first decline in 22 months. It called into question Japan's economic prospects, as the country is heavily dependent on trade with China and other countries.

The Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) fell to a seasonally adjusted 49.4 in November, whereas last month this value was 50.7.

The sharpest decline in manufacturing activity of 49 was recorded in November 2020. The indicator fell below the 50-mark that separates contraction from expansion. Consequently, back then manufacturing activity in Japan declined as well.

Laura Denman, an economist at S&P Global Market Intelligence, said cooling demand and sharp inflationary pressures have hampered both production and new orders.

The results of the business survey showed that the output contracted at the quickest pace in over a two-year period. The output contraction happened for the fifth month in a row.