New wave of infections causes contraction in business conditions in Japan

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    TOKYO- Activity in Japan’s services sector extended its run of declines to the 11th month in December, a private sector survey showed, as a new wave of coronavirus infections led to a contraction in business conditions.

    The data comes after Japan’s government in December cut its view on private consumption, which contributes about 55% of the country’s gross domestic product, as sectors such as domestic tourism were showing weakness.

    The final Jibun Bank Japan Services Purchasing Managers’ Index (PMI) edged down to a seasonally adjusted 47.7 from the prior month’s final 47.8 and compared to a preliminary 47.2 reading.

    The headline index remained firmly in contraction territory, below the 50 neutral level, where it has been since February.

    “Latest data indicated both activity and incoming business contracted,” said Usamah Bhatti, economist at IHS Markit, which compiles the survey.

    “Firms often cited that demand had been dampened by rising infection rates.”

    The main reading contracted again as declines in new and outstanding business as well as prices firms charged offset their optimism about the 12 months ahead.

    Surveyed firms said a third wave of COVID-19 infections had hurt demand as it led to cancellation of orders.

    “Private sector firms were hopeful that the pandemic would diminish over the course of the next 12 months to induce a broad-based economic recovery,” said Bhatti.

    The composite PMI, which includes both manufacturing and services, also remained in contraction for an 11th month, coming in at 48.5 in December from the previous month’s final of 48.1.