Output and new order growth rates accelerated, while businesses raised employment amid rising backlogs of work. Robust demand also encouraged firms to pass on part of the sharp rise in cost burdens to customers.

In line with stronger business confidence, firms increased input buying and were less cautious over inventory levels.

The headline Nikkei Japan Manufacturing Purchasing Managers' IndexTM - a composite single-figure indicator of manufacturing performance - increased to 54.8 in January, up from 54.0 in December. The headline PMI has risen for three successive months and the latest reading signalled the sharpest improvement in the health of the Japanese manufacturing sector since February 2014.