In a boost to the anti-deflation policy of
Shinzo Abe, prime minister,
and the Bank of Japan, the core Japanese consumer price index inflation, which excludes
fresh food but includes energy, rose at an annual 0.9% rate in October, up from
0.7% the previous month. Excluding both fresh food and energy, the inflation
rate was 0.3%, the highest level since 1998 - - 15 years ago. Meanwhile, business conditions improved sharply at Japanese manufacturers in
November, led by strong demand in both domestic and foreign markets. Output grew
at the fastest pace in 50 months, whilst new orders rose at the sharpest rate
since February 2006. New business from abroad expanded at a similarly sharp
pace, aided by both a weak yen and growth recovery in foreign markets.
Meanwhile, reflective of strong output and new order growth, employment expanded
at a sharper rate.
The headline seasonally adjusted Markit/JMMA Purchasing Managers’ Index (PMI) -
- a composite indicator designed to provide a
single-figure snapshot of the performance of the manufacturing economy - -
posted at 55.1 in November, up from 54.2 in October. This signalled the
strongest improvement in operating conditions in the Japanese manufacturing
sector since July 2006. November marked the ninth successive month in which the
PMI posted above the 50.0 no-change mark, the longest period of growth in nearly
Following the pattern seen in output, new orders rose for the
ninth month running, whilst the pace of growth accelerated for a fourth
successive month to the sharpest recorded since February 2006. Some panellists
attributed this growth in new business to a recovery in demand for exports in
Thailand and Hong Kong. Supporting this, growth in new export orders hit a
42-month high in November.
Production expanded for the ninth successive month in
November, and the rate of output growth accelerated for the fourth month running
to the sharpest recorded since September 2009. Fuller order books and advanced
demand before April’s scheduled sales tax rise were identified by some
respondents as key drivers of November’s production growth.
Outstanding business also grew at an accelerated pace, recording the sharpest
rate of expansion since April 2006 in November. This was the fourth successive
month of accumulation of backlogs of work. In response to two successive months of sharp growth in output and new orders,
employment expanded at Japanese manufacturers at a fractionally faster pace than
recorded in October. This was the fourth successive month of growth in payroll
numbers and, though relatively small, the latest expansion was the sharpest in
Input prices increased for the eleventh month in succession in November. The pace of inflation eased fractionally from October, but remained relatively strong. Respondents cited the rising cost of raw materials, in particular crude oil and naptha, as the key drivers behind cost-inflation. Meanwhile output prices were unchanged from October, continuing a five-month sequence of virtual stagnation. Anecdotal evidence suggested that the impact of rises in raw material prices was offset by competitive pressures.
Claudia Tillbrooke, economist at Markit and author of the report
said: “Business conditions in the Japanese manufacturing economy improved for the ninth consecutive month and at a rapid pace in November, driven for the most part by an expansion of both foreign and domestic demand.
“New export orders, buoyed by the weak yen, hit a 42-month growth high in November. If the pace of this expansion is maintained into 2014, it may serve to compensate for the expected weakening of consumer demand following April’s scheduled consumer tax hike. Exports could be further bolstered by the outcome of the Trans-Pacific Partnership deal, due to conclude in December.
“The latest data also indicated that manufacturing employment rose at a non-negligible pace for the first time since June, marking a welcome respite from the virtual stagnations recorded in August, September and October. Whether this signals an improvement in employers’ confidence in the recovery’s sustainability remains to be seen, but the latest growth nonetheless offers a welcome improvement.”
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