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Japan May Manufacturing PMI hits record low in 4 years

The Nikkei Flash Japan Manufacturing Purchasing Managers' Index touched record-low in May, marking the sharpest decline in nearly four years since December 2012, due to major slump in new orders, a survey showed.

The Nikkei PMI fell 47.6 in May from 48.2 in April, while output index fell to 46.9 in May from 47.8 in April. A reading above 50 signals an expansion, while one below 50 points to a contraction in activity.

The fall in PMI has put fresh pressure on the government and central bank to offer additional economic stimulus. The index for new orders fell to a preliminary 44.1 from 45.0 in the previous month, also suggesting the fastest decline since December 2012.

While, contraction in foreign demand has led to such a downfall, the aftermath of the dramatic earthquake in Kumamoto region of south Japan is still weighing hard on certain producers. Further, prevailing uncertainty over overseas economies has propelled delay in business investment, amid a technical recession that Japan narrowly escaped in the first quarter.

However, market speculations are on for a delay in sales tax hike by Prime Minister Shinzo Abe till next April. The hike is focused to adopt measures that will strengthen the ailing domestic demand.

Economists also expect the Bank of Japan will ease monetary policy even further by July as a strong yen and still sluggish economy threaten its ability to meet its ambitious inflation target, a Reuters poll showed.

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