Activity in Japan’s service sector edged up to the strongest in almost a decade in March as the return of Chinese tourists boosted demand.
(Bloomberg) — Activity in Japan’s service sector edged up to the strongest in almost a decade in March as the return of Chinese tourists boosted demand.
The au Jibun Bank’s purchasing managers index of activity in Japan’s service sector rose 0.2 points to 54.2, for its highest reading since October 2013. The measure has been above the 50 mark that separates contractions from expansions since September. An index of the country’s manufacturing sector gained 0.9 points to 48.6.
“The lifting of remaining Covid-19 restrictions in mainland China supported service providers further, notably in the form of inbound tourism,” said Usamah Bhatti, economist at S&P Global Market Intelligence, which compiles the survey.
Inbound tourism has been a bright spot as the yen’s decline boosts the spending power of foreign travelers while high inflation continues to weigh on consumption by domestic shoppers. The government announced this week it will spend more than 2 trillion yen ($15.3 billion) to help households and companies cope with rising costs further.
The positive service sector data contrasted with manufacturing sector activity that remained in contractionary territory. Still, given the service sector has a much larger impact on the economy, Japan is likely to regain further growth this quarter after narrowly avoiding a recession at the end of last year.
“I’m expecting low growth in the first quarter, less than 1% when annualized, but that’s mainly due to sluggish exports,” said Taro Saito, head of economic research at NLI Research Institute. “Normalization from the pandemic continues and consumption will be resilient given how much people have saved up.”
(Updates to add economist comment)
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