Japan's headline manufacturing purchasing managers' index (PMI) increased to 48.6 in March 2023 from 47.7 in February 2023. According to the au Jibun Bank Flash Japan PMI survey, the Japanese manufacturing sector is still contracting, but at a slower rate. Both output and new orders fell in the most recent survey period, but at the slowest pace in five months.

According to au Jibun Bank, the country also saw a decrease in the rate of input price inflation, improved supply chains, and strengthened business sentiment at the end of the first quarter.

Furthermore, Japan's flash composite output index increased from 51.1 in February to 51.9 in March.

"According to March flash PMI data, activity at Japanese private sector firms increased for the third consecutive month." Meanwhile, manufacturing firms reported further negative results at the end of the first quarter, with continued decreases in both output and new orders. While contraction rates have slowed since February, they remain strong, extending the current period of weakness to nine months. However, manufacturers reported that supply chains had continued to normalise, with supplier delivery times increasing to the least extent since October 2020," said Usamah Bhatti, economist at S&P Global Market Intelligence.