Japan PMI Services was finalized at 46.9 in September, up from August’s 45.0. While the reading signal further contraction in activity, the pace was slowest in the current eight-month sequence. PMI Composite was finalized at 46.6, up from 45.2.

Shreeya Patel, Economist at IHS Markit, said: “Japan continues to be impacted by the COVID-19 outbreak… There were some signs of stabilisation, however, with activity falling to the least extent since the pandemic began… “Optimism was also evident regarding the year-ahead outlook. Sentiment returned to positive territory amid hopes of rising demand in the next 12 months. Employment, meanwhile, dropped only marginally. Overall, there are signs of improvement in the sector, however recovery is far from secure.”

Full release here.

Japan unemployment rate rose to 3.0% in August, up from 2.9%, matched expectations. That the highest level since 3.1% in May 2017. Jobs-to-applicants ratio fell to 1.04, down from 1.08, hitting the lowest level since January 2014.

The unemployment remained relatively low by global standard. Yet, there are concerns of further slowdown in recovery in the job markets, and unemployment rate could rise further. While worsening conditions call for more government support, Finance Minister Taro Aso insisted that he’s not considering a third extra budget at present, as funds in the second package wasn’t used up yet.

Japan BoJ Tankan Large Manufacturers Index rose to -27 in Q3, up from , -34, but missed expectation of -23. Large Manufacturing Outlook rose to -17, up from -27, matched expectations. Large Non-Manufacturing Index rose to -12, up from -17, missed expectation of -9. Non-manufacturing outlook rose to -11, up from -14, missed expectation of -9. All industry capex rose 1.4%, slightly above expectation of 1.3%.

The improvement in large manufacturers’ mood was welcomed considering that the index just hit the lowest level in 11 years in Q2. But the bounce is disappointing with pandemic uncertainty persisting. There are increasing calls for additional fiscal stimulus from new Prime Minister Yoshihide Suga. Ruling coalition party leader Natsuo Yamaguchi indicated earlier that the government is considering addition large-scale spending package.

Japan PMI Manufacturing was finalized at 47.7 in September, up from August’s 47.3. That’s the highest level since February, but it’s, nonetheless, still a contractionary reading. There were slower falls in output and new orders while business expectations continue to recover.

Tim Moore, Economics Director at IHS Markit, said: “Subdued business conditions persisted across the Japanese manufacturing sector in September, but there were signs that the downturn has lost intensity. The latest declines in output and new orders were the slowest since the first quarter of 2020 and much softer than seen earlier in the pandemic. Some manufacturers noted that a turnaround in export sales to clients elsewhere in Asia had helped to offset some of the demand weakness across Europe and the United States.

“The most encouraging aspect of the latest survey was a sustained rebound in business optimism from the low point seen during April. More than twice as many manufacturers plan to boost production in the next 12 months as those that forecast a decline, which pushed the survey measure of business expectations to its highest since May 2018.”

Full release here.