UPDATE 1-Quake drives Japan manufacturing PMI to 2-yr low

 * Headline index logs record monthly fall
 * Output, new orders components at 2-year lows
 * Outlook for business activity depends on
rebuilding-analyst

 (Adds analyst quotes)	
 By Kaori Kaneko	
 TOKYO, March 31(Reuters) - Japanese manufacturing activity
slumped to a two-year low in March and posted its steepest
monthly decline on record as a devastating earthquake and
tsunami disrupted supply chains and production operations, a
survey showed on Thursday.	
 The Markit/JMMA Japan Manufacturing Purchasing Managers
Index (PMI) fell to a seasonally adjusted 46.4 in March, the
lowest since April 2009 and down from February's 52.9.	
 The data provided one of the first quantitative assessments
of the severe damage to production from the March 11 quake and
tsunami in northeast Japan, which triggered a nuclear safety
crisis and widespread power shortages.	
 "The impact from the power outage, supply chain disruption
and a halt of many factories' activity after the quake is large.
There is a possibility that the PMI index will further weaken,"
said Takeshi Minami, chief economist at Norinchukin Research
Institute in Tokyo.	
 "It is a major issue now how the nuclear crisis develops,
and stock market players are also closely watching it. The
outlook for business activity depends on progress in
reconstruction and recovery."	
 Japan's government is struggling to contain the world's
worst nuclear crisis in 25 years that triggered wide power
outage, while carrying out a huge humanitarian relief effort
following the March 11 quake and tsunami that devastated coastal
areas of northeast Japan and left 27,500 people dead or missing.	
 It is set to compile several extra budgets to cope with the
disaster with the first likely due next month but it will
initially focus on urgent steps such as construction of
temporary housing, leaving markets few clues about when
reconstruction demand will start to give a much needed lift to
the economy. [ID:nL3E7ET3M0]	
 In the survey, the headline index slipped below the 50
threshold that separates contraction from expansion for the
first time in three months, while the extent of the drop from
the previous month exceeded those seen after the attacks of
Sept. 11, 2001, and the collapse of Lehman Brothers in 2008.	
 "Suppliers' delivery times lengthened at a survey record
pace amid widespread disruption in the supply chain resulting
from the disaster," said Alex Hamilton, economist at Markit.	
 "These delays could affect production in coming months and
drive input price inflation even higher than the two-and-a-half
year peak seen in March."	
 The output component of the PMI index dropped to a two-year
low of 37.7 in March from 53.9 in February, logging the fastest
decline on record with a number of respondents saying rolling
blackouts and logistical problems in their supply chains
restricted production, the survey showed.	
 The index for new orders also dropped to a two-year low of
39.6 from February's 54.3. Some manufacturers responded that
customers had to cancel or postpone orders.	
 Dealing an additional blow to manufacturers, the input price
index increased to 65.2, the highest since September 2008, due
to higher costs of raw materials such as crude oil and naphtha.	
 The survey, conducted between March 11 and March 25,
received only two-thirds of its average number of responses.	
	
 (Editing by Edmund Klamann and Rodney Joyce)	
 

UPDATE 1-Quake drives Japan manufacturing PMI to 2-yr low