Japan’s services PMI in May

According to the report provided by Markit Economics, Japan’s services PMI stood at 53 in May 2017—compared to 52.2 in April 2017. It met the market’s expectations of 53.

Japan’s Services PMI Strengthened, Impacted the Economy

In May, Japan’s service PMI expanded for the eighth consecutive month. A level above 50 shows an expansion in activity, while a level below 50 shows a contraction. In May, the services PMI showed a stronger improvement in its business climate.

The stronger improvement in the services PMI indicates that production output, new orders growth, and export orders rose at a stronger rate in May 2017. The growth in May was the highest figure since August 2015.

Japan’s (EWJ) (DXJ) overall domestic demand and overseas (VT) (ACWI) (VTI) demand in the service sector improved in May 2017. Japan’s economy depends on its exports. Consumer spending is also one of the important factors for Japan’s economic growth. Improvement in both of these factors could drive the country’s economic growth.

Bank of Japan’s decision

On the other hand, the Bank of Japan maintained status quo in its monetary policy review meeting on June 15, 2017. The central bank decided to maintain its quantitative easing program to increase inflation, which is still low despite improvement in other economic factors.

Various corporates in Japan might improve their productivity by utilizing the central bank’s easy monetary policy. Improved productivity could lead to higher employment, higher business activity, and wage growth in the economy. It could also lead to higher consumer spending and higher inflation.

In the next part of this series, we’ll analyze US inflation in May 2017.

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