Japan PMI Manufacturing was finalized at 50.6 in May, up from April’s 49.5. That’s the first expansionary reading since October 2022, signalling a modest overall improvement in operating conditions. Also, business optimism reached highest level since January 2022, while supplier performance stabilized.

Tim Moore, Economics Director at S&P Global Market Intelligence, said: “The latest au Jibun Bank PMI survey highlights a decisive turnaround in manufacturing sector performance during May and brings to an end a six-month period of weakening business conditions.”

Full Japan PMI manufacturing release here.

The Japanese government has revised its assessment of the nation’s economy, marking the first downgrade in ten months. This change in outlook indicates pausing in part” in Japan’s moderate recovery, primarily attributed to weakening domestic demand. This shift represents a departure from the previously consistent description of the economy as “recovering at a moderate pace” over the past six months.

A critical aspect of this revised assessment is the downgraded view on business investment, which has been adjusted for the first time in nearly two years. The government’s monthly report cites the slowing of global growth, particularly in China, as a significant factor contributing to the “pausing” in pick-up in business investment.

Despite this downgrade, the Cabinet Office maintained its assessment of other economic components. Private consumption is described as “picking up,” driven by a continued recovery in service demand. The report also highlights a positive trend in both industrial production and exports, which are showing signs of “picking up”.

The government’s report, however, underscores several downside risks to the Japanese economy. These include the impacts of aggressive interest rate hikes in other countries and the economic slowdown in China. Additionally, the government emphasizes the need for full attention to price increases, developments in the Middle East, and fluctuations in financial and capital markets.

Full monthly economic report of Japan’s cabinet office here.

Japan PPI accelerated to 4.9% yoy in May, up sharply from April’s 3.8% yoy, above expectation of 4.5% yoy. That’s also the largest annual rise since September 2008. Oil and coal prices jumped 53.5% yoy. Nonferrous meals were up 41.6% yoy. Wood and lumber prices were also up 9.7% yoy.

Shigeru Shimizu, head of the BoJ’s price statistics division, said, “rising commodities prices reflecting the global economic recovery is pushing up wholesale prices for a broad range of goods.”

“The data shows companies are starting to pass on rising costs, though the gain in wholesale prices is driven more by external factors rather than domestic demand,” he said.