Japan's manufacturing Purchasing Managers' Index slowed in May to 52.8 from 53.8 in April amid weaker new order growth, data from IHS Markit and Nikkei showed June 1.
Output and new orders continued to grow, albeit at a slower rate than the rise in April, but new export sales rose at a quicker pace, according to the report.
"A stronger improvement in foreign demand for Japanese goods will be welcomed; however the pace of expansion in May remains markedly below those seen at the start of the year prior to the Japanese yen appreciation," said IHS Markit economist Joe Hayes.
Businesses retained a positive sentiment for the next 12 months, and confidence rose to a four-month high.
