Japan's manufacturing activity contracted in May amid mounting trade tensions between the U.S. and China, as output and new orders declined for the fifth time in a row, flash data from Nikkei and IHS Markit showed.

The headline Purchasing Managers' Index dropped to 49.6 in May from 50.2 in April, when it rebounded from the prior month. A reading below 50 indicates contraction while a reading above that reflects expansion.

Exports fell at the sharpest rate in four months while backlogs of work decreased in May at the same pace as a month earlier.

Meanwhile, business sentiment turned negative for the first time in 6.5 years.