The weak yen and rising inflation are making life difficult for Japanese manufacturers. The loose monetary policy of the Japanese central bank, which contrasts with the U.S. Federal Reserve, is driving up the cost of raw materials. This has recently pushed inflation in Japan to a 40-year high.
As a result, Japanese manufacturers are struggling, as evidenced by shrinking business activity in November.
Au Jibun Bank’s flash Purchasing Managers’ Index (PMI) fell to 48.9 in November from 51.8 the previous month, the first decline in three months.
The unexpected drop in Japan’s manufacturing purchasing managers’ index to 49.4 was the main cause of the decline. This was also the first decline since January 2021. Analysts had expected a reading of 50.9, with a reading above 50 being a sign of expansion.
Japan’s services purchasing managers’ index fell to 50.0 in November from 53.2 the previous month, indicating that service sector activity was flat in November.
The yen barely moved despite the news and remained at 139 yen to the dollar.