The Au Jibun Bank Japan Manufacturing PMI declined to 48.3 in March 2025 from 49.0 in the previous month, falling short of market expectations of 49.2. This marks the ninth consecutive month of contraction in the manufacturing sector, according to preliminary estimates.
Japan manufacturing shrinks the most in one year
The latest figure also represents the steepest contraction in factory activity since March 2024. Both production and new orders saw sharper declines, despite an uptick in foreign sales, which had shrunk in the prior month. As a result, firms scaled back significantly on purchasing activity and continued to reduce their inventories in response to weaker demand.
However, there was a positive development in the labor market, with employment rising for the fourth consecutive month, and the pace of hiring was notably stronger than in February. Additionally, backlogs of work were depleted at a faster rate, signaling a reduction in uncompleted orders. Despite these improvements, delays in input deliveries persisted for the seventh consecutive month, although the severity of these delays lessened.
Inflationary pressures ease
On the cost side, inflationary pressures on both input and output prices showed signs of easing, though they remained higher than the series average, reflecting ongoing cost concerns for manufacturers. In terms of sentiment, there was a notable improvement, suggesting that businesses may be cautiously optimistic about future prospects despite the ongoing challenges in the manufacturing sector.
