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Japan Service Sector Contracts At Slower Pace In June

Japan's service sector contracted at a slower pace in June as some firms returned to business, final data from IHS Markit showed on Friday.

The au Jibun Bank services Purchasing Managers' Index rose sharply to 45.0 in June from 26.5 in May. This was above the flash estimate of 42.3.

Any reading below 50 indicates contraction in the sector.

Output increased in June and new orders decreased due to the economic effects of Covid-19.

Order books were benefited by the improvement in social mobility. Outstanding business declined solidly in June and employment fell marginally.

Confidence increased to the highest in four months in June as some firms were optimistic.

The au Jibun Bank composite output index increased to 40.8 in June from 27.8 in the previous month. The flash score was 37.9.

"We have to remember that Japan's economy was already in a recession before the second quarter and 2020 was set to be economically challenging, notwithstanding the huge COVID-19 shock," Joe Hayes, an economist at IHS Markit, said.

"Until demand rises persistently at a strong rate, we can expect a sluggish recovery," Hayes added.

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