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Japan Services Sector Growth Fastest in Nineteen Months

Japan Services Sector Growth  Fastest in Nineteen MonthsJapan Services Sector Growth  Fastest in Nineteen Months

Activity in Japan’s services sector expanded at the fastest pace in 19 months in March as outstanding business improved, allowing companies to charge more for their goods, a private survey showed on Wednesday.

The Markit/Nikkei Japan Services Purchasing Managers Index rose to 52.9 in March on a seasonally adjusted basis from 51.3 in February. The index remained above the 50 threshold, which separates expansion from contraction, for the sixth consecutive month, Reuters reported.

“The underlying performance of the Japanese economy continues to strengthen, with the PMI data suggestive of accelerated GDP growth during the first quarter of the year,” said Paul Smith, senior economist at IHS Markit, which compiles the survey.

The index for outstanding business rose to 51.6 in March from 50.2 in the previous month to show the fastest growth in 20 months. The business expectations index rose to 55.4 from 53.8 in February to mark the fastest growth since April last year.

Services account for around two-thirds of Japan’s gross domestic product, so expansion in that sector could help overall economic growth.

While the country is seeing a modest economic recovery, the improvement has been highly dependent on a rebound in exports.

 Market Scramble

The slide in Japanese shares that sent the benchmark index falling nearly 1% is primarily linked to the yen’s appreciation amid a decline in US interest rates. But it probably has something to do with the underlying economy as well, Nikkei reported.

“The market has already factored in economic growth for the time being,” said Daiju Aoki at UBS Wealth Management, indicating that trades based on hopes of a global economic recovery and inflation have settled down for the short term. He withdrew his buy recommendation on US inflation-linked bonds, which had symbolized the brief “Trump rally”.

Investors concerned about the US president’s ability to carry out his policies, such as a big-spending infrastructure program, started selling Japanese equities in late March.

Tuesday’s decline was sparked by increasing belief that the economic rebound that began in mid-2016 will lose momentum. Higher crude oil has stopped lifting prices for now, and manufacturers’ sentiment is not getting any brighter either.

Tokyo stocks lost ground even as other Asian shares held firm Tuesday because the Japanese economy’s recovery is lacking in strength, some observers said.

 

 

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