Services sector in Japan is recovering after the return of foreign tourists

In September, there was another activity growth in the Japan’s services sector, driven by increased demand due to the decline of COVID-19 cases. The prospect of easing the current restrictions on foreign tourism strengthened the country’s hopes for an economic recovery.

Fumio Kishida, the Prime Minister of Japan, declared that all the expenses associated with inbound tourism will be increased to about 5 trillion yen (i.e., $34.52 billion) per year in order to gain profits from the current fall of yen against US dollar to a record low established 24 years ago.

The Jibun Bank Japan Services purchasing managers' index (PMI) grew to 52.2 from the previous point of 49.5 in August, therefore continuing its growth again, given the non-tourist season.

Next week, Japan plans to soften the current tourism restrictions on foreigners’ entry into the country, hoping that the sharp decline of yen against US dollar and other major currencies might help the country to attract more foreign tourists.

Joe Hayes, senior economist at S&P Global Market Intelligence, stated that the removal of restrictions on inbound tourism in Japan, starting in October, has to stimulate the country’s economic activity. The easing of these restrictions will benefit Japan while its national currency experiencing the sharp decline, which might endanger the country with imported inflation.

However, these easing measures caused concerns for several enterprises because of a potential growth of expenses on utility bills, fuel, and wages, the prices of which remain quite high.

The composite PMI, estimated by either manufacturing and services, has started to grow again from the previous fall to 49.4 in August. In September, the composite PMI was 51.0.