Japan’s tertiary industry activity remains soft as economy stays weak

Tertiary industry activity in Japan remained weak, although at the same level as previous month, invigorating signs of continued weakness in the world’s third-largest economy, raising doubts about the sustainability of the first quarter expansion.

The Tertiary Industry Activity Index, a measure of the total value of services purchased by Japanese businesses, declined 0.7 percent in May, following a 1.4 percent gain the previous month, the Ministry of Economy, Trade and Industry said in a report on Tuesday. The decline remained in line with the median estimate of economists.

In addition, hopes of stimulus surged over the weekend after Prime Minister Shinzo Abe’s ruling coalition won a convincing majority in the upper house. The victory prompted a huge 4 percent rally in the Japanese stock market, which likely also benefited from robust US non-farm payrolls on Friday.

Further, the gross domestic product of the country expanded at an annualized rate of 1.9 percent in the first quarter, beating market forecasts. The gains were largely attributed to leap year, which provided an extra day for consumption and overall economic activity.

Meanwhile, spending in services had declined sharply during the end of 2015, before staging a moderate recovery in January. However, growth has remained on the downside since then, creating external headwinds for the economy, keeping production at low levels.