Service sector

Sentiment among Japanese economy watchers rises in May as service sector recovers

Students walk along the shore of a seaside park as a plane prepares to land at Haneda Airport in Tokyo, June 2, 2022. (AP Photo/Hiro Komae)

TOKYO (Kyodo) – Business confidence among workers in jobs sensitive to economic trends rose for the third consecutive month in May, supported by a strong services sector following the lifting of anti-coronavirus restrictions, revealed government data on Wednesday.

The spread of confidence index under current conditions compared to three months earlier among “economy watchers”, such as taxi drivers and restaurant workers, came in at 54.0, up 3.6 points from April, according to the Cabinet Office.

A reading above 50 indicates that more respondents reported improving conditions than worsening conditions in the past three months.

Following the continued improvement, the Cabinet Office updated its baseline assessment, saying: ‘The economy is gradually recovering’, and dropped its reference to the negative impact of coronavirus for the first time since it emerged in February 2020.

In the survey, many workers said their companies did well during the Golden Week holiday week through early May. It was the first time in three years that the key holiday period for the tourism and retail sectors did not include any COVID-19-related restrictions, such as shorter working hours for restaurants and bars.

“Even after Golden Week, we saw more customer visits on weeknights or weekends,” said a department store employee in Kyushu’s southwest region, adding that people seemed less cautious about going out.

A worker at a store on a shopping street in Japan’s northeast Tohoku region said social activities were returning to normal, with festivals and events planned before the summer.

Still, many have expressed concern about the prospects for trade, citing soaring prices for food, fuel and other raw materials following Russia’s invasion of Ukraine.

“Commodity prices have jumped and almost all of our retail prices have gone up,” said an employee at an appliance store. “We are also facing a severe supply shortage due to the Ukraine crisis, lockdowns in China and the semiconductor drought.”

The Diffusion Index assessing business sentiment in the coming months climbed 2.2 points from the previous month to 52.5 in May, up for the fourth consecutive month.

The Cabinet Office surveyed 2,050 workers from May 25 to 31, of whom 1,831, or 89.3%, responded.