Japan's services industries are facing a modest contraction as reported by the Ministry of Economy, Trade and Industry (METI) on Thursday. In August, the seasonally adjusted index of tertiary (services) industry activity declined by 1.1% compared to July. However, when viewed on an annual basis, this sector still logged an increase of 0.7%.
In terms of specifics, the sub-index for broad-ranging personal services saw a decrease of 0.7% in August relative to July, yet managed to achieve a year-on-year growth of 0.6%. Meanwhile, the broad-ranging business services sub-index faced a decline of 0.8% from July, although it registered a positive growth of 1% year-on-year, according to the data from METI. The transport sector experienced the most significant contraction in August, with an index reduction of 3.1% when compared to July, and a slight decrease of 0.4% from the previous year.
Conversely, the finance and insurance sector index exhibited a contrary trend, increasing by 1% from July and rising by 3.2% on an annual basis. In the context of recent economic policy considerations, it is noted that Bank of Japan policymakers are deliberating on the possibility of a tighter monetary policy.
However, they are also keeping a close watch on real wage gains, which they deem crucial for enhancing consumer spending in Japan. The August services report from METI presents a somewhat contrasting view when compared to the latest service-sector purchasing manager index (PMI) releases from S&P Global.
It indicates a different narrative as the headline au Jibun Bank Japan Services Business Activity Index stood at 53.7 in August, unchanged from July and signifying a solid expansion in activity. As a reminder, PMI readings above 50 indicate sector expansion, while those below indicate contraction..