Latest data highlighted a positive improvement in operating conditions in the Japanese manufacturing sector. Production increased at the fastest pace since before the higher sales tax was implemented in April 2014, while there was a sustained moderate rise in new orders. Subsequently, manufacturers hired additional staff in February, although at a slower pace. Meanwhile, inflationary pressures persisted, as input prices continue to rise at a marked rate.
The headline PMI posted at 51.6 in February, down slightly from 52.2 in January, but nonetheless signalling a moderate overall improvement in operating conditions at Japanese manufacturers. Furthermore, the latest reading posted above the long-run series average.
Production at Japanese goods producers rose for the seven consecutive month in February, with the latest increase the quickest since March 2014. According to panellists, this was supported by an increase in new work intakes and the start-up of new projects.
February data signalled growth in total new orders for the ninth successive month. Firms attributed the latest increase to improved marketing strategies and stronger demand for new products launched. Despite slowing from the previous month, the rate of expansion remained above the long-run series average.
Meanwhile, new orders from abroad rose at the fastest pace since December 2013. Firms commented on the falling yen/dollar rate leading to greater exports volumes, with some mentioning increased trade with Korea and China. All three monitored sectors signalled export growth, with consumer goods producers registering the sharpest rise in new work both for total and overseas sales.
Higher production requirements and stronger demand conditions subsequently led manufacturers to hire additional staff in February. However, employment growth slowed from the previous month, with both consumer and intermediate goods producers registering declines in their staff numbers.
The negative side of the depreciation of the yen was seen through purchasing costs, which rose sharply due to a steep hike in raw material prices. Output charges, on the other hand, declined for the first time since August 2014, but at only a slight pace.