Japan's service sector sentiment falls to record low in April as virus takes toll

Source: Xinhua | 2020-05-14

Sentiment in Japan's service sector fell to a record low for a second successive month in April as economic activity slowed amid efforts to curb the further spread of the coronavirus pandemic, the government said in a report on Wednesday.

The monthly Economy Watchers survey's diffusion index, in which a score of more than 50 means people view current economic conditions in a positive light, dropped 6.3 points from a month earlier to 7.9, marking the lowest level since comparable data became available, the Cabinet Office said.

The office downgraded its overall assessment for conditions in the reporting period, saying that due to the impact of the spread of the COVID-19, the economy is facing serious difficulties. As for the future, conditions are expected to deteriorate further, the office added.

The Cabinet Office said Wednesday that conditions in the service sector were set to worsen in the coming months, with the sentiment index for coming economic conditions dropping 2.2 points to 16.6, also marking a record low.

Some of those surveyed in the service industry said the state of emergency declared by the government over the coronavirus crisis, that saw regional governors request business closures and the restricted movement and contact between people amid efforts to prevent the virus from spreading further, had forced their businesses to shut.

Some restaurant owners said that their businesses had completely stalled and construction workers said that work had dried up owing to projects being canceled amid social distancing measures being put in place.

Taxi drivers, meanwhile, said that due to people staying at home prior to and as per the government's later request in the recording period, patronage had slumped.

The state of emergency was initially declared by Japanese Prime Minister Shinzo Abe on April 7 for seven prefectures, thereafter expanded nationwide and the deadline extended to the end of May.

An official from the Cabinet Office was quoted as saying that the survey's record low figures were largely attributable to the coronavirus pandemic, describing the situation as "so severe."

"The coronavirus outbreak had a significant effect on the survey's outcome, which showed remarkably poor figures that could not be imagined. I would like to believe that sentiment has hit bottom, but unfortunately the situation is so severe," the official told a press briefing on the matter.

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 survey released Wednesday showed that sentiment had deteriorated significantly in the recording period, remaining far below the boom-or-bust 50 line meaning that, overall, more people polled felt conditions had worsened in comparison to the previous three months.

The latest figure comes on the heels of a reading of 14.2 in March, with headline numbers for the past two months dropping well below those following the 2008 global financial crisis and in the wake of the triple earthquake, tsunami and nuclear disasters that struck the northeast here in 2011.

The survey was conducted between April 25 to 30, and polled 2,050 workers across Japan.