Japan's factory activity shrank for the tenth consecutive month in April as confidence among manufacturers dived to almost 5-year lows, dented by worries about U.S. President Donald Trump's tariff policies, a private-sector survey showed on Wednesday.
On the brighter side, the service sector activity returned to growth as customer demand improved further and helped lift sales.
The au Jibun Bank Japan flash manufacturing purchasing managers' index (PMI) stood at 48.5 in April, a touch above the 48.4 reading in March.
The index has stayed below the 50.0 threshold that separates growth from contraction since July last year.
The subindex for new orders dropped at the fastest pace since February 2024, while the manufacturers' business confidence worsened to its lowest level since June 2020.
"Uncertainty over the global economic outlook and trade environment, staff shortages and an ageing population dampened confidence across both the manufacturing and service sectors," said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence.
Trump touted "big progress" in last week's first round of bilateral tariff talks with Japan, which would include tariffs, non-tariff barriers and exchange rates.
Providing some support for a fragile economic recovery, the au Jibun Bank flash services PMI expanded to 52.2 in April, improving from 50.0 in March. Customer demand drove the strongest increase in sales in three months.
Inflationary pressures continued to be high in both sectors which saw overall input prices rise at the fastest rate in two years. As a result, firms raised their sales prices.
The survey aligns with data showing Japan's wholesale inflation accelerated in March, suggesting a persistent cost burden that adds to corporate strains from uncertainty over U.S. tariff policy.
The au Jibun Bank flash Japan composite PMI, which combines both manufacturing and service sector activity, swung back to growth to stand at 51.1 from 48.9 in March.
