Japan Factory Activity Expands a Fifth Month While Services Shrink

(Bloomberg) -- Japan’s manufacturing activity expanded for a fifth month in June while services continued to shrink amid measures to contain the coronavirus.

The au Jibun Bank Japan’s purchasing managers index for activity in the manufacturing sector fell 1.5 point to 51.5, while its measure of service sector activity gained 0.7 point to 47.2. Numbers above 50 indicate an expansion while those below signal a contraction.

Despite this month’s improvement, the services PMI has shown shrinking activity every month since February 2020.

Strong exports have supported Japan’s manufacturers and helped the economy offset domestic weakness during repeated extensions of emergency to quell the virus in Tokyo and other economic hubs.

Service activity may continue to improve now that the most recent emergency has been lifted everywhere outside Okinawa and the country’s vaccination drive is gathering speed.

“Private sector businesses were optimistic that business conditions would improve in the year ahead,” said Usamah Bhatti, economist at IHS Markit, which compiles the survey. “Positive sentiment stemmed from expectations that the accelerating vaccination program would contribute to an easing of restrictions and trigger a broad-based recovery.”

For now, some business restrictions remain in place to prevent flareups of the virus as Japan prepares to hold the Tokyo summer Olympics next month. The games are likely to provide a much smaller economic boost than they would have otherwise because spectators from overseas will be barred from events and the number of domestic fans has also been capped.

©2021 Bloomberg L.P.