Japan’s Service Sector Growth Hits Six-Month High in February

Japan’s service sector expanded at its fastest pace in six months in February, driven by strong sales and surging export demand, particularly from Taiwan and Vietnam, according to an S&P Global Market Intelligence survey.

The au Jibun Bank Japan Services Business Activity Index climbed to 53.7 in February, up from 53.0 in January, surpassing the initial estimate of 53.1. This marked the fourth consecutive month of expansion, staying above the 50.0 threshold that separates growth from contraction.

Economist Usamah Bhatti noted continued improvement in the sector, with new business growth persisting despite a slight slowdown. However, optimism weakened due to labor shortages.

Japan’s service industry remains a key driver of economic growth, offsetting the ongoing weakness in manufacturing caused by sluggish global demand. The composite PMI, covering both manufacturing and services, rose to 52.0 in February from 51.1 in January.

Cost pressures eased slightly but remained high, with inflation in labor, fuel, and raw materials affecting businesses. While price increases slowed to a four-month low, concerns over U.S. trade policies and workforce shortages dampened future confidence, marking the slowest optimism since January 2021.

Despite challenges, the service sector’s resilience continues to support Japan’s economy, maintaining solid momentum amid global uncertainties.