TOKYO (Reuters) - Japan's factory activity contracted at the fastest pace in about a decade in March, as the world's third-largest economy struggled with a severe downturn in overseas and domestic demand due to the coronavirus crisis.
The manufacturing slowdown offers the latest evidence of the pain business and the economy are feeling from the pandemic and highlights the challenges policymakers face.
The final au Jibun Bank 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 likelihood of the manufacturing recession deepening in the coming months is high," said Joe Hayes, economist at IHS Markit, which compiled the survey.
"Overall, the cascading impact of COVID-19 on the global economy is diminishing the chances of a V-shaped recovery."
The PMI survey showed output and new orders fell to levels not seen since April 2011 - the month after an earthquake and tsunami ravaged Japan - with some companies reporting outright production halts.
New export orders fell sharply amid reports of severe economic distress among key trading partners in China and other parts of Asia.
Manufacturers reported the most negative outlook for output over the next 12 months since IHS Markit started tracking the future outlook in July 2012.
Big manufacturers turned pessimistic for the first time in seven years in the three months to March, a central bank survey showed earlier on Wednesday, further ramping up pressure on policymakers.
Japan's economy shrank at the fastest rate in 5-1/2 years in the December quarter due to the hit from a sales tax hike and the U.S.-China trade war. Many analysts see it slipping into recession - two straight quarters of contraction - this quarter as the virus hits the global economy.
