Japan manufacturing PMI
Japan’s manufacturing PMI (purchasing managers’ index) stood at 51.4 in October 2016, as compared to 50.4 in September, and met market expectations. This reading was the country’s highest manufacturing PMI since January 2016.
From March 2016 to August 2016, however, Japan’s manufacturing PMI showed a huge contraction. Remember, a level above 50 indicates an expansion in industrial activity, while a level below 50 indicates contraction in industrial activity.
Japan’s October manufacturing PMI was mainly due to the rise in production output. New orders also rose at a faster rate. Overall domestic demand and overseas (VTI) (VEU) demand showed little improvement in October. New export orders also showed improvement.
Bank of Japan’s recent decision
On September 21, 2016, the Bank of Japan declared a monetary policy decision. It didn’t change its deposit rate—it left it at -0.1%—but it did introduce a new policy framework to control the yield curve in an effort to boost economic growth (EWJ) (DXJ).
The central bank announced that it would buy ten-year Japanese government bonds to keep yields around 0% while keeping an eye on short-term rates. The deposit rate was left unchanged at -0.1%. The central bank also announced that it would expand its monetary base until the CPI (consumer price index), excluding fresh food, meets its 2% target.
If the central bank’s new policy framework supports growth in the economy, we may see a change in the economic condition of the economy.
In the next part of this series, we’ll analyze China’s (FXI) Manufacturing PMI in October 2016.