Japanese factory contraction slows in July

In July, Japanese manufacturing activity shrank at a slower pace than last month, although new export orders contracted at the fastest in more than 3-1/2 years, an obvious indication that recent yen revenues are heavily impacting exporters.     

The IHS Markit/Nikkei Japan Flash Manufacturing Purchasing Managers Index or simply PMI soared to 49.0 in July on a seasonally adjusted basis vs. a final outcome of 48.1 in June.

The headline index remained below the 50 threshold, separating contraction from expansion for the fifth month.

The index for new export orders edged down to a preliminary reading of 44.0, that would be the lowest value since December 2012.

International demand slumped at the steepest rate in over three-and-a-half years, with numerous panelists blaming the appreciation of the Japanese yen causing a reduction in global competitiveness.

The Japanese yen has soared approximately 13% vs. the greenback so far this year, and some Japanese policymakers are concerned that further revenues will eat up exporters' earnings and raise deflationary pressure by lowering import prices.

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