Japan April manufacturing contraction slows but export slump deepens - Flash PMI

TOKYO, Reuters - Japanese manufacturing activity contracted at a slightly slower pace in April thanks to a pick up in hiring, but new export orders fell at the fastest pace in almost three years in a sign slow global demand remains a major pressure point for the economy.

The Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 49.5 in April from a final 49.2 in March but remained below the 50 threshold that separates contraction from expansion for a third month.

"Japan's manufacturing sector remained stuck in its rut at the start of Q2, with the factors which have prohibited any growth such as US-Sino relations, growth fears in China and the turn in the global trade cycle, all remaining prominent risks," said Joe Hayes, economist at IHS Markit, which compiles the survey.

Underscoring the risks, the index for new export orders fell to a preliminary 47.1 from a final 48.1 in March to reach to lowest level since July 2016.

The United States and China are trying to hammer out a deal to end a months-long trade war that has disrupted supply chains and hurt global trade and investment in a blow to world growth.

Japan is exposed to the dispute as it ships big volumes of electronics items and heavy machinery to China which are used to make finished goods destined for the United States.

Official March trade data on Wednesday underlined just how vulnerable Japan is to a downturn globally and in particular China, with exports down for a fourth straight month as China-bound shipments slumped again.

In one positive sign, China's GDP data, also released on Wednesday, showed the economy defied expectations for a slowdown in the first quarter, offering tentative hope that growth in the Asian powerhouse is starting to stabilise.

In Japan's flash PMI, employment was another bright spot, with the jobs index up at 52.2 from a final 51.4 in the previous month as companies hired more workers.

IHS Markit's Hayes said as domestic demand for goods remain weak and firms scaling back production, the "the service sector will need to pick up any slack to help keep Japan’s economy afloat.”

(Reporting by Stanley White; Editing by Shri Navaratnam; [e-mail]; [phone] twitter.com/stanleywhite1; Reuters Messaging: [e-mail])