The Nikkei Japan Manufacturing Purchasing Managers' Index, or PMI, slipped to 53.2 in March from 54.1 in February, marking the weakest improvement in business conditions since October 2017, flash estimates from IHS Markit and Nikkei showed.
New orders increased at their weakest rate in five months, while the rate of job creation eased amid the joint-softest pace of output growth since July 2017.
"Output, new order and employment growth rates all slowed, while longer lead times continued to impact supply capacities," said Joe Hayes, economist at IHS Markit.
Hayes said that 2018's first-quarter average indicates a strong operating environment despite two successive months of weaker headline PMI readings. "With new business increasing for an 18th straight month, companies raised output prices to a quicker extent, signaling confidence in the demand climate and purchasing power of their clients," he added.
The flash PMI is published a week before final PMI data is released.