Japan business activity jumps to near 1-year high in December on sharp expansion in new orders

Growth of business activity in Japan jumped to 11-month high during December, following rapid expansion in new orders, which rose at the quickest rate in nearly one-and-a-half years. Subsequently, pressure on capacity started to build and volumes of unfinished business rose for the first time in six months.

The headline seasonally adjusted Business Activity Index posted 52.3 in December, up from 51.8 in November, signalling a stronger expansion in activity at Japanese service providers. Moreover, the latest reading was the highest since January and contributed to the highest quarterly average since Q4 2015.

Contributing to the rise in activity was a solid expansion in new orders. In fact, the rate of expansion was the quickest since July 2015, with a number of firms mentioning the opening of new stores and new clients. Resulting from stronger new order growth, pressure on capacity at Japanese services firms started to build, as volumes of unfinished work increased.

On the price front, input prices rose at a solid rate and one little-changed from November’s 23- month peak. Charges on the other hand declined, albeit only slightly. Forecasts towards output over the coming year were less optimistic in December, however, with the degree of business sentiment easing to a five-month low.

Finally, forecasts towards the outlook were relatively subdued in December, with mentions of greater raw material and fuel costs, labour shortages and increased price competition weighing on confidence.

Meanwhile, USD/JPY traded at 102.15, down -0.54 percent, while at 6:00GMT, the FxWirePro's Hourly Yen Strength Index remained neutral at 70.88 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex