Japan Dec. final manufacturing PMI shows sustained growth, good news for PM Abe, BOJ

Tuesday, 6 January 2015 01:34 - - {{hitsCtrl.values.hits}}

(Reuters) - Japanese manufacturing activity showed sustained growth in December, a survey showed on Monday, suggesting domestic demand continues to recover after the economy fell into a surprise recession last year. The final Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) was 52.0 in December, slightly less than a preliminary reading of 52.1 and unchanged from the final reading in November. It remained above the 50 threshold that separates contraction from expansion for the seventh consecutive month. The output component of the PMI index was 52.5, less than a preliminary reading of 53.3 and slightly below 52.7 in November.

New export orders rose for a sixth straight month but at a slightly slower pace than in November. The economy unexpectedly slipped into recession in the third quarter of last year as a sales tax increase in April hit consumer spending harder than expected, while exports were uneven for most of the year. However, the economy is expected to have resumed expansion in the fourth quarter as consumer spending recovered and companies increased capital expenditure. Late in December, Japan’s government approved stimulus spending worth $29 billion aimed at helping the country’s lagging regions and households with subsidies, merchandise vouchers and other steps, though analysts are sceptical about how much it can spur growth. The package, worth 3.5 trillion yen, was unveiled two weeks after a massive election victory by Prime Minister Shinzo Abe’s ruling coalition gave him a fresh mandate to push through his “Abenomics” policies to reflate the long-moribund economy, a strategy which has so far had mixed results. The government said it expects the stimulus plan to boost Japan’s GDP by 0.7 percent. The government is also expected to start cutting corporate taxes from April in a bid to spur more activity and encourage firms to pay higher wages.