An index monitoring manufacturing activity in Japan came in with a seasonally adjusted score of 49.9 in May, Markit Economics said on Thursday - touching a two-month high.
That's up from 49.4 in April, although it remains just below the mark of 50 that separates expansion from contraction.
"The manufacturing sector showed welcome signs of stabilizing after the steep downturn seen in April, but producers are clearly still struggling as demand has been hit by the April 1st tax hike," Markit Chief Economist Chris Williamson said. "Of additional concern is the fall in export orders, which is a sign of softening demand in key trading partners. GDP growth is consequently likely to have weakened significantly in the second quarter."
Among the individual components of the survey, the manufacturing output index came in at 49.2 - also hitting a two-month high and up from 46.2 in the previous month.
The index for new orders continued to contract but at a slower rate, as did the indexes for quantity of purchases.
New export orders continued to decline at a faster rate, as did backlogs of work. Output prices slipped into contraction from expansion.
Employment continued to expand, albeit at a slower pace - as did input prices and stocks of purchases. Stocks of furnished goods expanded after showing no change in April.
Supplier delivery times changed direction to shorten.
"While many companies signaled optimism that the slowdown would be temporary, the cutting of prices and downturn in job creation are signs the sector is preparing for continued tough conditions in the coming months. The extent to which the economy can rebound in the second half of the year remains highly uncertain at this stage," Williamson said.
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May 22, 2026 14:46 ET Minutes of the latest Fed policy session was the highlight of the week along with survey data on the U.S. housing market. In Europe, survey data signaled the trends in the euro area private sector. Further, consumer price inflation data from the U.K. was in focus. In Asia, various economic indicators from China drew attention to the health of the economy.