Japan's factory activity expands at fastest pace since early 2018 - PMI - Reuters

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Smoke rises from a factory during the sunset at Keihin industrial zone in Kawasaki, Japan, January 16, 2017. REUTERS/Toru Hanai

Japan's factory activity expanded in April at the fastest pace since early 2018 on a global demand recovery, a private sector survey showed on Friday, though new coronavirus curbs cast a shadow over the overall economic outlook.

The activity expansion highlights the tailwind manufacturers have been getting from strong external demand, particularly from China, which forms the basis for keeping intact the economic recovery from last year's steep coronavirus drop.

The final au Jibun Bank Japan Manufacturing Purchasing Managers' Index (PMI) rose to a seasonally adjusted 53.6 in April, its most robust expansion since February 2018.

That was up from a flash reading of 53.3 and the previous month's final of 52.7. It meant manufacturing activity came in above the 50.0 threshold that separates contraction from expansion for the third straight month.

The PMI survey showed output also grew at its fastest pace since February 2018, while the taking on of new graduates at the start of the country's fiscal year in April and higher capacity needs due to increased orders boosted the rate of job creation.

Manufacturers saw input prices rising for an 11th month on high demand for intermediate goods used for producing cars and electronics, with the rate of input cost inflation coming in at its fastest since late 2018.

Businesses reported a positive medium-term activity outlook, said Usamah Bhatti, economist at IHS Markit, which compiles the survey.

It was too early to say exactly what impact a third state of emergency for Tokyo and other prefectures declared last week to contain the pandemic would have on manufacturers in the months ahead. read more

The survey showed firms' output expectations for the year ahead were in line with an IHS Markit forecast for 7.7% industrial production growth this year, Bhatti said.

"This does not fully recover the output lost to the pandemic in 2020," he said.

"Further disruption to the manufacturing sector cannot be ruled out as COVID-19 restrictions are reintroduced as infections rise once again."

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