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Japan manufacturing sector downturn continues as China orders fall

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Japan manufacturing sector downturn continues as China orders fall

Japan's manufacturing activity continued to contract in August amid challenging domestic and overseas market conditions, survey data compiled by Jibun Bank Corp. and IHS Markit showed.

The headline purchasing managers' index slipped to 49.3 in August from 49.4 in July. The consensus estimate of economists polled by Econoday was for a reading of 49.5. A print below 50 reflects contraction, while a reading above that indicates expansion.

New business fell at the sharpest rate in five months on the back of sluggish demand at home and abroad, including from Chinese customers.

"Japanese goods producers continued to signal difficult conditions during August, reflecting the broader regional tone within the APAC manufacturing economy," said Joe Hayes, economist at IHS Markit. "Softer growth across Asia, particularly in China, was reported to have dented export opportunities."

The latest data release comes amid tensions with South Korea, which adds further downside risk to an already fragile environment, Hayes said.

Output continued to decrease, though the pace of decline was the weakest since January.

Production outlook over the next 12 months was subdued, with respondents citing the end of Olympic Games-related work and the looming consumption tax hike as factors that could weigh on production volumes.