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Pandemic pushes Japanese service sector sentiment to record lows

13 May 2020 01:27 PM

A survey by the Cabinet Office released today shows that morale in Japan's services sector fell to a record low in April, indicating an intensification of pressure on the economy from coronavirus-driven closures at home and around the world.

The survey of workers such as taxi drivers, hotel staff and restaurant employees - known as "economic watchers" for their proximity to consumer and retail trends - showed their confidence in current economic conditions down to 7.9 from an all-time low of 14.2 in March.

The reading comes after a major economic indicator on Tuesday showed the fastest decline in nine years in March, supported by other data from that month and April which reflects a gloomy economic outlook.

A Reuters poll shows it is likely the economy had already slid into recession in the first quarter due to the worsening global pandemic, following the recession of the last quarter of 2019. This suggests two consecutive quarters of deflation.

Services sector companies usually enjoy strong sales in April, marking the beginning of the fiscal year in Japan, as well as the golden week holiday season that begins towards the end of the month.

As the government plans to lift the state of emergency for some provinces that have seen stable infection numbers, many major cities, including Tokyo, are likely to maintain the current restrictions at least for the rest of this month.

The outlook index, which indicates confidence in future conditions, fell 2.2 points to a record low of 16.6 in April from 18.8 in March.

Prime Minister Shinzo Abe said on Monday that the government is ready to take further measures to support the economy, in addition to the standard $1.1 trillion stimulus package announced in April that focuses on household cash payments and loans to small businesses affected by the epidemic.

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