TOKYO, June 28 Japanese manufacturing activity expanded in June at the fastest pace in more than two years, a survey showed on Friday, in a positive sign that domestic demand is picking up pace in the world's third-largest economy.
The Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 52.3 in June from 51.5 in May.
The index remained above the 50 threshold that separates contraction from expansion for the fourth consecutive month and showed that activity expanded at the fastest pace since February 2011.
"The data are consistent with the sector expanding at an annualised rate in excess of 5 percent during the second quarter, meaning we will see industry providing a healthy contribution to gross domestic product when the preliminary estimates for economic output are released in August," said Paul Smith, senior economist at Markit.
The index for new orders rose to 54.7 in June from 53.1 in May, indicating that orders were at their strongest in three years as domestic demand improved.
The index for new export orders fell to 52.1 from 52.6 in the previous month.
The output component of the PMI index rose to 52.7 in June from 52.5 in May, to show output expanded at the fastest pace in 20 months.
The improving trend will be welcome for Prime Minister Shinzo Abe after a recent heavy sell-off in stocks, volatility in bonds and a spike in the yen raised concerns about the outlook for his economic recipe of radical monetary easing, fiscal stimulus and pro-growth policies.