A survey monitoring the service sector in Japan moved up into expansion in March, Markit Economics said on Thursday as its Performance of Service Index came in with a score of 52.2.
That's up from 49.3 in February, and it moved above the key level of 50 that separates expansion from contraction in a sector.
Among the individual components of the survey, the indexes for new business and employment continued to improve - although business sentiment dipped to a 21-month low as companies reported concerns around the effects on demand of the forthcoming sales tax rise.
Japanese manufacturing firms saw an expansion in output for the 13th consecutive month in March. However in comparison to February, output for the manufacturing sector grew at a slower rate.
"The latest data on the performance of the service sector was promising, with business activity increasing from the previous month of decline," said Markit economist Amy Brownbill.
"With output, new orders and employment all on the rise, the expectation is for continued growth over the next 12 months. However, most of the anecdotal evidence suggests that the improvement in March was linked to the upcoming increase in the sales tax."
Markit also said that its composite index for Japan came in at 52.8, up from 52.0 in the previous month.
The seasonally adjusted New Business Index increased for Japanese service companies, with the reading in March above the series average. Alongside this increase in new business was a rise in incoming orders for Japanese manufacturers. Similar to services, the growth in new orders was attributed to the rise in demand before the increase in sales tax.
Both manufacturing and service companies added to their payroll numbers. However, employment grew at a slower rate in comparison to the previous month, as the Composite Employment Index fell to a three-month low.
On the price front, prices charged by manufacturers declined for the first time in six months. In contrast, the price of inputs increased, which was partially blamed on the depreciation of the yen consequently leading to an increase in the prices of raw materials.
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