The preliminary Markit/Nikkei manufacturing Purchasing Managers' Index (PMI) for Japan declined to 47.6 in May from 48.2 in April. It was the lowest level since December 2012.

A reading below 50 indicates contraction of activity, a reading above 50 indicates expansion.

The index was mainly driven by drop in output and new orders.

"Manufacturing conditions deteriorated at a faster rate mid-way through the second quarter of 2016, suggesting the aftermath of the earthquakes were still weighing heavily on goods producers. Both production and new orders declined sharply and at the quickest rates in 25 and 41 months respectively," economist at Markit, Amy Brownbill, said.