Japan Services Sector Hits Roadblock: Japan’s services sector, a critical driver of the country’s economic growth, hit a significant roadblock in October. The final au Jibun Bank Service Purchasing Managers’ Index (PMI) revealed a notable slowdown, dropping to 51.6, a significant decline from September’s 53.8. This deceleration is raising concerns that a key sector sustaining Japan’s economic recovery is losing momentum.
While the PMI data still registers a positive reading for Japan’s service sector, the recent trends suggest that growth may be tapering off. Andrew Harker, Economics Director at S&P Global, highlighted this concern, noting that although the PMI remains in positive territory, there are unmistakable signs of a slowdown.
One of the reasons for this slowdown is weak demand, which has been affecting the sector’s performance. While consumption in Japan has maintained its post-pandemic momentum, the rise in new orders was the weakest since January. Additionally, new export orders slipped into contraction territory for the first time in 14 months.
On the employment front, the sector experienced growth. However, retirements offset the overall pace of job creation. Business expectations, while still optimistic, dipped to a nine-month low.
Also Read: China Services Sector Shows Fragile Growth Amid Economic Headwinds
The international backdrop is adding to the uncertainty. The escalating conflict in the Middle East and signs of slowing growth in China are casting shadows on Japan’s economic outlook. Japan, as one of the world’s largest economies, is susceptible to global economic shifts.
To mitigate the potential economic impact of rising inflation, the Japanese government introduced a comprehensive package of measures worth more than 17 trillion yen (approximately $113 billion). These measures are designed to cushion the economy against the challenges posed by inflation.
There is some positive news amid these concerns. Inflationary pressures have eased to a four-month low, despite increases in fuel costs and wages. This might provide some relief in an otherwise challenging economic landscape.
Japan’s journey toward a full economic recovery appears to be encountering unexpected hurdles. The slowdown in the services sector, combined with external factors, presents a complex economic landscape for the country to navigate in the coming months.
Our Reader’s Queries
What caused the bubble burst in Japan?
According to the data, the growth of broad money (M2+CD) surged to over 10% between 1987-89, which appeared to be excessive for an economy growing at a rate of approximately 4%. However, in late 1999, the newly appointed Bank of Japan governor, Yasushi Mieno, intentionally tightened money and increased interest rates, which effectively put an end to the bubble.
What percentage of Japan is service industry?
From 2011 to 2021, the workforce in Japan was distributed across various economic sectors. As of 2021, 3.17 percent of the workforce was employed in agriculture, while 23.71 percent worked in the industry sector. The majority of the workforce, 73.12 percent, was employed in the services sector.
Which sector contributes the most to Japan’s economy?
Japan’s GDP in 2021 saw a contribution of 0.95 percent from agriculture, while the industry sector accounted for 28.8 percent and the service sector for 69.89 percent. For more details, refer to Japan’s GDP.
What happened in Japan 1989?
In April 1989, Japan implemented a consumption tax. However, by late December of the same year, the Bank of Japan (BOJ) tightened monetary policy by raising the official discount rate from 2.5% to 4.25%. This caused the Japanese Yen to weaken against the US dollar, with the exchange rate dropping to as low as 145.06JPY/USD by September.