Japan’s Factory Activity Contracts for 10th Month as Export Demand Weakens

Japan's manufacturing sector shrank for the 10th consecutive month in April, as global demand softened and concerns over U.S. trade tariffs intensified. The final au Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, rose slightly to 48.7 in April from 48.4 in March. Although marginally better than the flash reading of 48.5, it remained below the 50 threshold that indicates growth.

Weaker overseas demand, particularly from China, Europe, and the U.S., weighed heavily on output. Export orders fell at their fastest pace since October 2023, while total new orders declined at the quickest rate since February 2024. Japanese manufacturers reported sluggish customer spending and reduced demand for semiconductors and machinery.

Adding to the pressure, ongoing tariffs from the U.S.—especially those targeting automobiles, a key Japanese export—have further dampened confidence. Japan’s chief trade negotiator, Ryosei Akazawa, is set to meet with U.S. counterparts this week to push for the full removal of these tariffs.

Business sentiment fell to its lowest level since June 2020, reflecting widespread concern over global economic prospects. Annabel Fiddes, Economics Associate Director at S&P Global, noted that firms are unlikely to see recovery without a rebound in domestic and external demand.

While input costs rose at the softest pace in a year, expenses related to transport, fuel, labor, and raw materials continued to pose challenges for manufacturers. As Japan’s industrial sector navigates prolonged weakness, future recovery hinges on a stabilization in global trade and improved demand dynamics.