Recent data showed that industrial activity in Japan contracted at a slower pace in December 2024, reflecting improvements in areas such as production and new orders. The Purchasing Managers’ Index (PMI) reached 49.6 points, nearing stability after months of consecutive declines.
Weak Domestic and External Demand Weighs on Production
Despite this improvement, production and new orders continued to contract due to weak demand in domestic and international markets. Some companies linked the weak demand to a slowdown in the semiconductor market, which impacted the growth of the industrial sector.
Increased Employment and Labor Market Improvement
Japan saw growth in employment during December, reaching the highest level since April 2023. Japanese companies hired more workers due to labor shortages, reflecting their readiness for future demand in industrial sectors.
Rising Input Prices and Production Costs
Input prices saw a noticeable increase due to rising costs of raw materials and labor, along with the impact of a weak yen on domestic inflation. To adapt to these higher costs, companies raised their output prices at the fastest pace in five months.
Japanese Financial Markets in 2024: Continued Improvement Despite Recent Decline
The Nikkei Index closed 2024 with a significant increase of 20%, despite a 0.96% decline on the last trading day of the year. This improvement reflects the support the market received from low monetary policies and weak interest rates.
Positive Outlook Despite Slight Decline in Yields
Despite a slight decline in Japanese bond yields, which reached their highest levels in over 13 years, markets expect continued improvement in 2025, especially with the Japanese government’s push for further economic reforms.