Japan final January manufacturing PMI shows fastest expansion in almost three years

Reuters

Published Jan 31, 2017 10:03PM ET

Japan final January manufacturing PMI shows fastest expansion in almost three years

TOKYO (Reuters) - Japanese manufacturing activity expanded in January at the fastest pace in almost three years as export orders surged, a private survey on Wednesday, suggesting that overseas demand has rebounded strongly.

However, some economists may temper their optimism due to concerns that growing U.S. trade protectionism could threaten Japan's export-focused economy.

The final Markit/Nikkei Japan Final Manufacturing Purchasing Managers Index (PMI) was a seasonally adjusted 52.7, slightly below a flash reading of 52.8 but still above the final reading of 52.4 in December.

The index remained above the 50 threshold that separates expansion from contraction for the fifth consecutive month, and showed that activity expanded at the fastest since March 2014.

The index for new export orders was 53.1, just below a preliminary 53.2 but still indicating the fastest gain in 12 months.

The index for total new orders, which measures both domestic and external demand, was 54.0, versus a flash reading of 54.1 and a final 53.2 in December. The data confirmed that new orders grew at the fastest in 13 months.

Recent data have suggested that Japan's sluggish economy may be slowly regaining traction.

In a quarterly review of its forecasts, the Bank of Japan on Tuesday raised its growth estimates for the fiscal year beginning in April and the following year, nodding to brightening prospects for exports.

But the central bank left unchanged its already optimistic inflation forecasts for the coming years, despite external factors that push up prices, such as a rebound in oil prices and rising import bills from a weak yen. [L4N1FL0A]

"Risks to both economic activity and prices are skewed to the downside," it said.

The PMI survey showed input prices accelerated to a 22-month high due to higher costs of raw materials stemming from weakness in the yen and higher fuel costs. But Japanese firms were only able to pass on only modest increases in the prices of their goods.

Some economists have expressed concern about Japan's economic outlook because its exports could suffer if U.S. President Donald Trump adopts protectionist trade policies.