TOKYO (Reuters) - Japanese manufacturing activity expanded in July at a slightly slower pace than initially estimated, revised data showed on Friday, in a sign that domestic demand has not fully recovered from a sales tax increase at the start of April.
The final Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 50.5 in July, from a preliminary reading of 50.8 and a final 51.5 in June.
The index remained above the 50 threshold that separates expansion from contraction for the second consecutive month, but the slowdown in activity could be a source of concern for policymakers.
Prime Minister Shinzo Abe’s government raised the national sales tax to 8 percent from 5 percent on April 1 to pay for welfare spending and will decide later this year whether to go ahead with another sales tax increase next year.
The tax hike in April caused a drop in consumer spending. A larger-than-expected decline in industrial production in June, according to government data, has raised concerns the economy will be slow to recover.
New orders expanded in July but at a slower rate than in June, while new export orders grew for the first time in four months, although only modestly, the PMI survey showed.
Policymakers have been counting on an export rebound to help ease the economic pain from the sales tax hike, but overseas shipments have been stubbornly weak.
Reporting by Stanley White; Editing by Kim Coghill