Japan's manufacturing Purchasing Managers' Index edged lower to 54.0 in February from a final reading of 54.8 in January, data from IHS Markit and Nikkei showed. The Nikkei Flash Japan Manufacturing PMI remained above the 50-point mark, signaling expansion.
Output and new orders grew at their slowest rate in February since October 2017, the report said.
A stronger yen coincided with slower new export order growth and lower prices to overseas customers. A further strengthening of the yen will create an "unwanted drag on inflationary pressures," said IHS Markit economist Joe Hayes.
In contrast, employment growth increased at an 11-year high, signalling "confidence that expansionary output and demand trends will continue for the time being," said Hayes.