Business conditions among Japan's manufacturing sector measured by a private sector survey remained in negative territory in December after posting the first contraction in nearly two years in November amid slowing global demand and despite easing price pressures. Input cost and charged price inflation dipped to 15-and nine-month lows, respectively.

The au Jibun Bank final manufacturing purchasing managers' index (PMI) based on a survey conducted by S&P Global edged down to a seasonally adjusted 48.9 (revised slightly from an initial 48.8) from 49.0 in November, when it dipped from 50.7 in October, slipping below the key line of 50 for the first time since January 2021. It compares with 50.8 in September, 51.5 in August, 52.1 in July, 52.7 in June, 53.3 in May, 53.5 in April and 54.1 in March. The current level is the lowest October 2020 and well below 55.4 recorded in January 2022, when the Omicron storm hadn't had a full impact on the economy and Russia hadn't invaded Ukraine yet.

Both output and new orders slumped in December but at slightly softer rates than in November. With output volumes falling at a slower pace than new orders, firms were able to focus on completing outstanding orders, as signaled by a third consecutive depletion in backlogged work, S&P Global said.

Firms were hopeful for a general market recovery in the new year but the degree of confidence was the weakest in seven months amid concerns over further price hikes and the relatively weak yen, which pushes up import costs, it noted.

Japan's industrial production posted a third straight monthly drop in November, down by a firmer-than-expected 0.1 percent, as global demand for electronic parts, notably from China, continues to shrink and output of general machines dips in reaction to higher demand the previous month, preliminary data released last week by the Ministry of Economy, Trade and Industry showed. The METI's survey of producers indicated that output is likely to decline further in December and January.

Business conditions among Japan's manufacturing sector remained in negative territory in December after posting their first contraction in nearly two years in November amid slowing global demand and despite signs of easing price pressures.

Little change was expected in the final data. In the flash data released in December, the au Jibun Bank manufacturing purchasing managers' index (PMI) fell to a seasonally adjusted 48.8 from a final 49.0 in November, when it dipped from 50.7 in October, slipping below the key line of 50 for the first time since January 2021.

The Purchasing Managers' Manufacturing Index (PMI) is based on monthly questionnaire surveys of selected companies which provide an advance indication of what is really happening in the private sector economy by tracking changes in variables such as output, new orders, stock levels, employment and prices across the manufacturing sectors.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.