The Japanese services sector remained in contraction for the eighth consecutive month during September, but the pace of contraction has eased to the lowest level seen since the beginning of the pandemic. The final Jibun Bank Japan Services PMI picked up to a seasonally adjusted reading of 46.9 in September from 45 in August and a preliminary reading of 45.9.

The contraction in the sector was driven by a faster decline in new export orders on account of weakening external demand. On a positive note, however, services sector companies in Japan are more upbeat about their outlook for the next 12 months on hopes for economic recovery.

Employment in the sector also continued to reduce for the seventh consecutive month but the pace of reduction in jobs has eased. Average input costs continued to decline in September with some companies passing on the cost savings incurred by reduced input costs and reduction in workforce to their clients via discounts in a bid to boost sales.

Shreeya Patel, economist at IHS Markit, remarks, “Overall, there are signs of improvement in the sector, however recovery is far from secure. Demand across the country remains subdued, with tourism and travel restrictions impeding new work volumes across the service sector.”