Japan's manufacturing activity went down in August according to data published by the Bank of Japan.
Japan's Purchasing Managers' index (or PMI) fell down for the fourth straight month, to 49.3 from July's 49.4. Being below 50 means that the manufacturing activity is contracting, which is concerning and a consequence of a slowing down global demand of Japanese goods, as the output and total new orders, which have been contracting in the last 9 months, followed the trend.
On the bright side, Japan's factory output went up in July, despite analysts that foresaw a drop.
The Japanese are expecting a tax hike in the upcoming months, as an attempt to fix Japan's public debt problem (mostly caused by an aging population). To counter the negative effects this will have in consumption, the Japanese already announced temporary fiscal measures.
The Yen, on the other hand, is enjoying the advantages of being considered a safe-haven currency. By 6:06 GMT the NZD/JPY pair was going up 0.12 percent at 66.98. The AUD/JPY slightly rose by 0.01 percent at 71.44, while the GBP/JPY went up 0.09 percent at 129.25. Trump's decision to impose a 15% tariff on a variety of Chinese goods while China decided to retaliate imposing tariffs on american crude oil.
The Japanese Prime Minister Shinzo Abe announced on Monday that he is meeting with his Russian counterpart Vladimir Putin on the Eastern Economic Forum which is happening at Vladivostok from September 4. They intend to discuss a potential peace treaty and joint economic activities in the Russian-dominated Japanese Islands.
Asian Countries Following the Trend
The trade war is affecting the region, as the Asian factory activity declined last month due to their export-reliant nature. Despite China's factory activity surprisingly expanded on august, as shown by Markit's report, South Korea, Taiwan, and India weren't as lucky.
India's Purchasing Managers' index hit a 15 month low, as demand and output grew at their slowest pace in a year, as costs keep rising.
According to a survey published by IHS Markit, the index fell to 51.4 last month from July's 52.5, remaining slightly above 50. Some manufacturers reported a lack of available financing options, cash flow problems and a slowing down domestic and global demand.
“August saw an undesirable combination of slowing economic growth and greater cost inflationary pressures in the Indian manufacturing industry,” claimed an IHS Markit representative, “Another worrying sign was the first drop in input buying for 15 months, which reflected a mixture of intentional reductions in stocks and shortages of available finance,” he added.
China's Caixin/Markit PMI index went up to 50.4 from July's 49.9, remaining above 50, which separates contraction from growth.