Japan manufacturing PMI hits 1-year high in December on sharp rise in production, new orders

Manufacturing activity in Japan improved sharply during the month of December, hitting 1-year high during the period, following upbeat performance in production as well as new orders. Also, it widely beat market expectations, remaining starkly above the 50-point neutral mark.

The headline Nikkei Japan Manufacturing Purchasing Managers’ Index (PMI) posted 52.4 in December, up from 51.3 in November, signalling a sharper improvement in manufacturing conditions in Japan. In fact, the latest reading was the highest since December last year and contributed to the strongest quarterly average since Q4 2015.

The higher figure reflected increases in output, new orders and employment. Production at Japanese manufacturers rose for the fifth consecutive month. Moreover, the rate of expansion was the sharpest registered during 2016.

Further, a stronger expansion in production was matched by a faster increase in new orders during December. New order growth accelerated to a 12-month high, with a number of firms mentioning improved advertising campaigns.

Also contributing to the rise in total new orders was an increase in international demand, with new export orders expanding for the fourth month running. On the price front, reports of greater raw material prices, particularly for oil- and metal- related items, stemming from the weakness of the yen led to a sharper increase in input costs.

Meanwhile, the USD/JPY traded at 118.03, up 0.24 percent, while at 5:00GMT, the FxWirePro's Hourly Dollar Strength Index remained neutral at -37.82 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex