Japan's service sector contracts at slower pace – PMI

TOKYO, April 5 (Reuters) – Japan’s services sector activity extended declines in March as businesses struggled to fully shake off the impact of the coronavirus pandemic, a private survey showed, but the pace of the downturn was the slowest since January last year.

Some businesses said that an easing of coronavirus-related curbs that were imposed from early January for Tokyo and other prefectures led to a modest recovery in demand.

The final au Jibun Bank Japan Services Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 48.3 from the previous month’s 46.3 and a preliminary 46.5 reading.

That meant service-sector activity stayed below the 50 level that separates contraction from expansion for a 14th consecutive month, but the pace of decline was the slowest since the start of the sequence.

“Latest PMI data indicated softer reductions in both business activity and new orders, with the former falling at the softest pace in 14 months,” said Usamah Bhatti, economist at IHS Markit, which compiles the survey.

“Overall private sector activity broadly stabilised in March, led by a solid expansion in Japanese manufacturing output.”

However, businesses are set for more challenges over the short term. On Thursday, the government decided to impose emergency measures, such as shorter business hours and refrain from activities like karaoke, in parts of some prefectures, including Osaka in western Japan in response to a resurgence of COVID-19 cases.

While most components of the service-sector survey remained in contraction, all of them rose, with outstanding business seeing its softest shrinkage since January last year.

The outlook component expanded at the fastest pace since May 2013, as firms cited hopes of a boost to demand at home and abroad from an end to the health crisis due to the successful vaccine rollout.

The composite PMI, which calculates both manufacturing and services, came close to stabilisation in March, rising to 49.9 from the previous month’s final 48.2 reading.

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