Why the Japan Services PMI Improved in June 2017

According to the report provided by Markit Economics, the Japan Services PMI (Purchasing Managers’ Index) (EWJ) (DXJ) stood at 53.3 in June 2017 compared to 53.0 in May 2017. It met the market expectation of 53.2.

It was Japan’s ninth consecutive month of expansion in service activity. A level above 50 indicates expansion in activity, while a level below 50 shows contraction in activity. June’s services PMI showed 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 June. Employment growth also rose for the sixth consecutive month. Overall domestic demand and overseas (VT) (ACWI) (VTI) demand in the services sector also improved.

The iShares MSCI Japan (EWJ), which tracks the performance of Japan, rose nearly 1.0% in June 2017. The WisdomTree Japan Hedged Equity ETF (DXJ) rose nearly 2.5%.

Japan’s consumer spending is now showing a little improvement. Consumer spending is an important factor for Japan’s economic growth. Improved consumer spending will also help corporations improve their productivity, which could lead to higher employment, higher business activity, and wage growth.

You may also be interested in Marc Faber’s Take on Asset Bubbles and Portfolio Allocation.