Japanese manufacturing is benefiting from the weaker yen, according to the Markit/JMMA manufacturing PMI data for October released this afternoon.
The print of 52.4 was up on the 51.7 in September and while it missed the market’s expectations of 52.8, this is the fifth month in a row that the “sector registered improving business conditions” and the highest level since March this year.
The extremely good news also is that this figure is above the long-run average for the survey of 50.6, suggesting that Abenomics and aggressive BoJ intervention are slowly working in Japan.
Key drivers were an acceleration in new orders, which moved to a seven-month high, and the weaker yen which drove export business to its strongest level since December 2013. Markit said that move “also resulted in upward pressure on import costs, as input price inflation hit the highest since March.”
That’s a dual positive from the BoJ and Japanese government’s point of view, as they want both growth and inflation.
But Trevor Balchin, senior economist at Markit, put some perspective on the otherwise positive data, noting that the “output expansion failed to accelerate”.
No doubt that is why BoJ governor Kuroda acted so decisively last Friday with more QE and a weaker yen. But if this release is any indication, his actions will bear fruit in the months ahead.
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