Japan’s Service Activity Expands in January

TOKYO (Reuters) – Japan’s service activity expanded for a third consecutive month in January, bolstered by increased new export business due to Asian demand, according to a private-sector survey released on Wednesday.

The final au Jibun Bank Service Purchasing Managers’ Index (PMI) rose to 53.0 in January from 50.9 in December, marking the highest level since September last year, according to the survey compiled by S&P Global Market Intelligence.

This figure exceeded a flash reading of 52.7 and remained above the 50.0 threshold that distinguishes expansion from contraction for the third consecutive month.

“The strength of the service sector continued to underpin growth of the overall private sector,” stated Usamah Bhatti, economist at S&P Global Market Intelligence.

Firms expressed confidence in their business outlook, with optimism fuelled by anticipated recovery in manufacturing output and a broad-based economic recovery, he added.

The services industry has acted as a bright spot for Japan’s economy, compensating for some weaknesses in the manufacturing sector. The subindex of new business expanded for a seventh consecutive month in January, reaching levels similar to those in July of last year. Companies noted that new client acquisitions and store openings contributed to this uptick.

Export growth reinforced overall demand in January, with new export business expanding for the first time in four months, achieving its highest level since last August, thanks to Asian demand.

Firms’ business expectations remained positive in January, supported by new contracts, business expansion plans, and increased hiring, according to the survey. Employment increased for the 16th consecutive month to fulfill business needs.

However, rising wages and increasing fuel and raw material costs led to a rise in input prices in January. Consequently, prices charged by firms reached their highest levels since last May as they passed on these rising costs to consumers.

The composite PMI, which integrates both manufacturing and service activities, grew to 51.1 in January, indicating the strongest expansion since September last year.

In a recent meeting, the Bank of Japan raised interest rates to their highest level in 17 years, discussing the possibility of further rate hikes while cautioning about potential inflation risks.