TOKYO, (Reuters) - Japanese manufacturing activity expanded at the fastest pace in almost four years in January, a survey showed on Thursday, with solid output and employment growth supporting a firm recovery in the world's third-largest economy.
The final Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) was a seasonally adjusted 54.8 in January, up from a preliminary reading of 54.4 and from a final 54.0 in December.
The index remained above the 50 threshold that separates contraction from expansion for the 17th consecutive month and reached its highest level since February 2014.
"New business opportunities increased at the sharpest rate in four years, supporting the quickest rise in output since February 2014," said Joe Hayes, economist at IHS Markit, which compiles the survey.
"Businesses appeared to derive confidence from the robust economic backdrop that official data has depicted, with optimism strengthening to a four-month high."
The output component of the PMI index stood at 54.7, which is the same as the preliminary ready and up from 54.5 in the previous month to also reach a peak not seen since February 2014.
The employment reading was at its highest in 11 months, while the final index for output prices rose to 52.5, up from a preliminary 52.0 and up from 51.0 in December, the best level since October 2008.
The output prices sub-index suggests government data measuring consumer prices may start to accelerate, a welcome sign for the Bank of Japan in its quest to achieve its 2 percent inflation target.
Gross domestic product has expanded for the past seven quarters, the strongest run of growth since 1994. The output gap shows demand exceeds supply by the most in more than nine years. Stock prices are at their highest in 26 years, and corporate profits are near an all-time high.