Japan's service sector sentiment falls in Aug, gov't downgrades economic assessment

Sentiment in Japan's service sector fell for the first time in two months in August, a Cabinet Office survey showed Wednesday.

The monthly Economy Watchers survey, in which a score of over 50 means people view economic conditions in a positive light, broke a two-month upward trend and retreated to 45.1 from 49.8 in July.

According to the Cabinet Office, whilst sales of beverages and summer-specific retail goods such as clothes and air conditioners remained strong due to the hot weather, the recent rise in the yen against major currencies, including a 15-year spike against the U. S. dollar recently, raised concerns about Japan's export-led economic recovery and dented overall service sector sentiment.

In August, the business index slumped to 42.7 from 48.2 in July, marking the first drop in two months and the labor index fell for a second straight month to 51.3 from 55.5 in July.

The overall forward-looking index, which gauges conditions two to three months ahead, plunged to 40.0 in August from 46.6 in July, marking the fourth straight month of decline.

The index stayed below the key 50 level for 39 months in a row.

The survey showed that movement toward a recovery in the economy "is moderating," the Cabinet Office said, with the government officially downgrading its assessment of the sentiment for the first time in nine months since November 2009, saying the latest survey showed that "while the economic climate remains tough, movements for picking up are slowing."

The previous assessment from the government was that "the economic climate is tough but there are signs of an improvement," a view first adopted in the March report as a result of a second consecutive upgrade.

The Economy Watchers Survey asks business-cycle sensitive workers their thoughts on existing and future economic conditions, to provide the government with a detailed picture of economic trends in Japan.

Segments of the economy surveyed include sectors such as retail, restaurant service, and taxi driving and the monthly report serves as both a consumer confidence indicator and a leading indicator for the rest of the economy.

The headline index stood below the key 50 level -- the dividing line between net positive and net negative responses to the survey -- for the 41st straight month in August.

The Cabinet Office's survey was conducted between Aug. 25 and Aug. 31.

Source: Xinhua