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Growth in Japan's manufacturing activity slowed for the second straight month in July, a preliminary private survey showed on Monday, as export demand stagnated.
The reading was an eight-month low, but remained well above the 50 threshold that separates expansion from contraction for the 11th consecutive month.
"The slowdown was driven by stagnation in export orders, amid reports of weaker demand from South East Asia markets," said Paul Smith, senior economist at IHS Markit, which compiles the survey.
"Nonetheless, the sector continues to add jobs, with employment growth remaining amongst the best since the financial crisis."
The preliminary index for new export orders fell to 50.0 from 53.4 in June.
The output component fell to 51.4 from a final 52.2 in June.
On the positive side, the employment index rose to a preliminary 53.4 from 53.2 in the previous month.
The index measuring expectations for future output also rose to a preliminary 63.0 in July, which is the highest since Markit began collecting this data almost five years ago.
The Bank of Japan (BOJ) and the government have been upgrading their economic assessments recently due to growing exports, a turnaround in consumer spending and rising capital expenditure.
Private-sector economists have also expressed more confidence in the economic outlook, but the improving outlook has been slow to translate into the acceleration in inflation that the BOJ is hoping for.