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Japan's services sector shrinks at fastest pace in 6 years

4 Mar 2020 12:02 PM

Japan's service sector contracted at the fastest pace in nearly six years in February as the spread of the Coronavirus threatened to push the economy into recession, dashing hopes for a recovery driven by domestic factors.

Pressures on the world's third-largest economy has accumulated rapidly in recent weeks as consumer and business sentiment began to take a sharp blow from the worsening slowdown in China, Asia's largest economy.

Jibun's Service Purchasing Managers' Index fell to 46.8 in February from 51.0 the previous month, its lowest reading since April 2014 when tax increases affected the economy.

The main figure was slightly higher than an initial reading of 46.7. The survey data highlighted the growing fallout from the coronavirus epidemic as consumers began to deal with tax increases in October, with new businesses contracting at the fastest pace in eight and a half years.

Companies were affected by low levels of tourism due to the low number of foreign visitors in Japan, with respondents saying they had to close their stores due to lack of work. Business expectations fell, growing at the slowest pace since July 2016, suggesting that the economy is likely to remain under pressure for the time being.

The composite PMI, which includes manufacturing and services, contracted at the fastest pace since April 2014, falling to 47.0 from the final 51.0 in January.

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