FX.co ★ Japan Factory Activity Shrinks the Least in 3 Months

In May 2025, the au Jibun Bank Japan Manufacturing PMI rose to 49.0, a slight uptick from April's 48.7, and in line with market expectations, initial figures revealed. Despite this improvement, it marked the eleventh month in a row of contraction; however, the decline was the least severe since February. This was attributed to a milder fall in new orders and foreign sales amid concerns about US tariffs. Employment saw a faster increase, while the accumulation of work backlogs reduced more slowly. In contrast, output shrank at a somewhat accelerated rate. For the eighth consecutive month, purchasing activity diminished, but there was a notable improvement in supplier performance. Input price inflation decreased to its lowest in 14 months, and output cost inflation dropped to its lowest level in nearly four years. Although business sentiment has improved from April’s near five-year low, it remains among the most subdued levels since the onset of the COVID-19 pandemic.