Japan's tertiary industrial activity rose for the first time in April after three months, as business performance of both enterprises and individuals became stronger.
The seasonally adjusted tertiary industry activity index rose 1.3% month on month in April, according to data from the Ministry of Economy, Trade and Industry or METI on Monday.
The latest reading reversed from the previous month's revised 0.6% decline. It also beat the Trading Economics' forecast of a 0.5% rise.
The monthly performance was primarily attributed to a 1.2% climb in individual services and a 1% increase in business services.
Japan's services sector nearly stagnated in recent months, while the manufacturing industry continued to drive the economy despite being pressured by the Middle East conflict in the first quarter. This was reflected in the flash Japan Composite PMI Output Index, which dropped to 51.1 in May from 52.2 in April.
Among tertiary industries, motor vehicle maintenance services saw the biggest growth, jumping 17.5%, while automobile retail grew 9% and machinery and equipment wholesale rose 5.8%. Only the electricity industry slipped 0.7%, according to METI.
The ministry said while stagnation is observed in some sectors, there is a sign that the industry is recovering.
ING predicted that semiconductors and car exports will be the main drivers for export growth in May, while imports will increase due to higher energy prices.
Japan became one of the countries that was rattled by the global supply disruption brought by the war in Iran, triggering concerns among consumers and businessmen. The capital spending of domestic enterprises during the first quarter was flat at 2% year over year, compared with the 6.5% growth in the previous quarter, despite corporate sales rising 1.1% year over year and ordinary profits climbing 14.6%.
Inflation in May slumped to its lowest since 2022 as consumer prices rose 1.3%, further weakening from the 1.5% growth in April. The CPI was way below the central bank's target of 2%. Meanwhile, producer inflation accelerated in May, rising 6.3% year over year, according to the Bank of Japan. The figures highlighted persistent cost pressures facing Japanese companies amid oil price hikes triggered by the war in Iran.
