Japan sees demand-driven services jump

A recent report indicates that activity in Japan's service sector recorded its fastest growth in five months in August, supported by increased domestic demand, higher business activity, and new projects. The final Purchasing Managers' Index (PMI) for the sector rose to 52.5 points, signaling ongoing expansion, with domestic demand continuing to grow for the 26th consecutive month and employment levels increasing for the 12th month. However, external demand for Japan's services contracted for the fifth consecutive month, while data shows cost pressures that could prompt the Bank of Japan to raise interest rates again, as inflation remains high compared to historical standards. The data confirms that domestic demand has become the main driver of growth despite the weakness of the external sector, and the improvement in activity could support a future shift toward normalization in monetary policy.

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