TOKYO (Reuters) - Japanese manufacturing activity expanded at the fastest pace in seven months in October as orders increased, suggesting the economy is finally starting to recover from a sales tax increase in April even as the central bank vows to pump more money into the system.
The final Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) was 52.4 in October, less than a preliminary reading of 52.8 but higher than a final 51.7 in September.
The index remained above the 50 threshold that separates expansion from contraction for the fifth straight month.
New export business rose at the strongest pace since December 2013, linked to the weakening yen.
Still, in a stark admission that economic growth and inflation have not picked up as much as expected, the Bank of Japan stunned investors on Friday by expanding its massive quantitative easing programme.
BOJ Governor Haruhiko Kuroda said that while the economy continues to recover, plunging oil prices, slowing global growth and weak household spending after the tax hike were weighing on price growth. He said additional asset purchases would guide inflation to the central bank's 2 percent inflation target next year.
However, the government could turn reluctant to go ahead with another increase in the sales tax scheduled for next year as the economy took such a long time to recover from the hike in April. A decision on the second-stage of the tax increase is expected by the end of this year.
(Reporting by Stanley White; Editing by Kim Coghill)