Friday brings good news for the world’s third-largest economy, which is struggling to keep pace with the rapid recovery underway in most parts of the world after the coronavirus crisis. Service sector activity across Japan posted growth for the first time since January 2020 even as consumer inflation saw an increase for the first time since the start of the pandemic.
The flash services PMI index at Jibun Bank recovered to 50.7 in October, from 47.8 in September. Meanwhile, the manufacturing sector grew at a faster pace during the period, with the Jibun Bank Flash Japan manufacturing PMI index rising to 53 for October, from 51.5 the previous month. With that, overall private sector activity across Japan posted its first growth in six months.
Both the manufacturing and service sectors saw increased output and new orders thanks to growing external demand. However, companies have come under pressure from supply chain disruptions and raw material shortages.
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At the same time, Japan’s consumer staples rebounded in September, rising 0.1% year-on-year from 0 in August, in line with economists’ expectations. The rise in consumer inflation has been triggered by rising fuel prices even as higher raw material costs force companies to increase the prices of goods and services.
Analysts expect inflation in Japan to continue rising, but at a much slower pace than seen in several other parts of the world. Indeed, unlike its Western counterparts, the Japanese economy suffered from weak domestic consumption long before the pandemic and even after restrictions eased, consumers remain reluctant to spend big amid weak wage growth.