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Investing.com-- Japan’s manufacturing sector shrank for an eleventh straight month in May, purchasing managers index data showed on Thursday, as softer local and overseas orders, amid concerns over increased U.S. trade tariffs, dented output.

The au Jibun bank flash manufacturing PMI read at 49 for the first three weeks of May as expected, although it improved slightly from the 48.7 seen in the prior month. A reading below 50 indicates contraction, with factory activity shrinking for an eleventh consecutive month.

May’s reading improved mildly from April on softer fells in new orders and export business. But production remained weak as export orders were pressured by increased U.S. trade tariffs, while domestic demand was also seen steadily cooling amid heightened economic uncertainty.

The au Jibun data also showed that overall Japanese business sentiment remained among the lowest seen since the COVID-19 pandemic.

Japan’s services sector fared slightly better, with the au Jibun bank flash services PMI remaining in expansion at 50.8 in May. But the sector slowed from the 52.4 seen in April, with client demand also seen slowing.

This saw overall business activity shrink for the second time in three months, with the au Jibun flash composite output index down to 49.8 in May from 51.2 in April.

Japan’s manufacturing sector was battered by increased U.S. trade tariffs, which weighed heavily on the electronics, industrial, and most importantly, the automobile sector.

Tokyo has engaged in steady trade talks with Washington, but has so far seen little progress towards the removal of all U.S. tariffs.

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