Japan’s Business Activity Shrinks in Sign of Lackluster Recovery

Japan’s business activities stalled in August, signaling a lack of strong momentum to help the world’s third largest economy get beyond a gradual recovery.

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(Bloomberg) — Japan’s business activities stalled in August, signaling a lack of strong momentum to help the world’s third largest economy get beyond a gradual recovery. 

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Au Jibun Bank’s purchasing managers index of activity in Japan’s service sector fell to 49.2, its lowest reading since February, sliding to below the 50 mark that separates contractions from expansions. 

A measure of the country’s export-heavy manufacturing sector also declined to 51.0, the lowest reading since January last year. 

Japan’s economy is still struggling to gain momentum, especially as daily Covid infection cases surged to a new record this month, heightening concerns over consumer spending and its impact on the service sector. Households are also seeing real wages drop amid the highest inflation since 2008 excluding tax-hike years, leading to Prime Minister Fumio Kishida’s pledge to quell price increases.

“The strongest concerns among Japanese private sector firms were the impact of the Ukraine war, inflationary pressures due to rising raw material and energy costs, and a global economic slowdown,” Usamah Bhatti, economist at S&P Global Market Intelligence, wrote in the PMI report Tuesday.