TOKYO (Reuters) - Japanese manufacturing activity expanded in June at a faster pace than the previous month but export orders contracted for the first time in almost two years in a warning sign about overseas demand, a preliminary survey showed on Friday.
The flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 53.1 in June from a final 52.8 in May.
The index remained above the 50 threshold that separates expansion from contraction for the 22nd consecutive month.
“The final PMI reading of the second quarter revealed a quickened pace of growth across the Japanese manufacturing economy,” said Joe Hayes, economist at IHS Markit, which compiles the survey.
“That said, for the first time since August 2016, new export orders declined. With geopolitical risk aplenty, haven demand for the yen remains a downside risk to the country’s manufacturing exporters,” he said.
The preliminary index for new export orders fell to 49.5 from 51.1 in May, showing the first decline in 22 months, in a worrying indication that trade protectionism and currency-market moves could hurt Japan’s export-focused economy. The yen has strengthened about 2 percent against the dollar this year.
In spite of the contracting export orders, the flash index for output rose to 53.4 in June from a final 53.1 in the previous month, in a sign of strength in the manufacturing sector.
Japan’s economy is expected to rebound in the second quarter from a contraction the first quarter that ended the longest growth streak since the 1980s bubble economy.
Risks to Japan’s outlook abound. The United States and China are embroiled in a trade dispute that pits the world’s two largest economies against each other.
Retaliatory tariffs could disrupt global supply chains for the tech and auto industries, sectors heavily reliant on outsourced components.
Japan is vulnerable, some economists say, as it ships electronics and car parts to China that are used to make finished goods destined for other markets.
Reporting by Stanley White; Editing by Richard Borsuk; Contact info: firstname.lastname@example.org; +81 3 6441 1984 twitter.com/stanleywhite1; Reuters Messaging: email@example.com