Japan's March services, factory activity slumps as coronavirus damage widens -flash PMI

Japan's services sector shrank at the fastest pace on record in March and the country's factory activity at its quickest in about a decade, a business survey showed on Tuesday, as the coronavirus outbreak hit demand at home and abroad. The slowdown in manufacturing and services raises the risk of a sharp downturn in the world's third-largest economy as the epidemic paralyses corporate and consumer activity.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) fell to a seasonally adjusted 44.8 from a final 47.8 in February, its lowest since April 2009. The au Jibun Bank Flash Japan Services PMI index slumped to a seasonally adjusted 32.7 from the previous month's 46.8, its lowest since the start of the services sector survey in September 2007.

The data showed the Japanese economy slipped into an "aggressive downturn" in March that was primarily led by the services sector, said Joe Hayes, economist at IHS Markit, which compiles the survey. "If the (virus) outbreak were to accelerate, the economic damage could far exceed what we've seen so far, particularly if the Olympic Games are postponed."

The Japanese government is under pressure to roll out stimulus after figures showed the economy shrank the most since 2014 in the final quarter of last year as it struggled to overcome a sales tax hike. The government is looking into offering cash payouts to households as part of a package that could be worth more than $276 billion to fight the crisis.

The PMI manufacturing survey showed total new orders falling at their fastest pace since March 2009 due to soft demand from overseas and domestic clients, while other indicators such as employment and overall output also dropped. The au Jibun Bank Flash Japan Composite PMI slumped to 35.8 in March, the lowest since April 2011 and down from the previous month's final of 47.0.

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