Factory activity within the nation has fallen to its lowest level in three years, a recent survey shows, adding to concerns over the impact of a delayed pickup in the global economy.
The data comes ahead of a review on the economy and inflation set to be concluded by the Bank of Japan next week.
The Jibun Bank Manufacturing Purchasing Managers Index fell to 48.5 in October, its lowest level since June 2016, as new orders dropped at the fastest pace seen in nearly seven years. Numbers below 50 indicate a contraction.
A sharp fall in the service sector index, to 50.3, is another cause of concern. Recent growth in Japan’s economy has been heavily reliant on resilience outside the country’s factory gates.
Joe Hayes, an economist at IHS Markit, which compiles the survey, flagged a recent typhoon that disrupted supply chains and a sales tax that may have front-loaded activity as temporary factors that could be overstating the weakness seen in the survey.
“Japan’s economy hit a widely-expected bump in October following the consumption tax increase, which took effect during the month,” Hayes said. “The latest data suggests the service sector is going to have a lot of slack to account for.”