Japan’s service sector slump deepens as COVID-19 emergency hits business

Japan’s service sector continues to shrink at a scary rate as COVID-19 emergency is extended in Tokyo and other parts.

ZEE5 Web Desk

February 4, 2021

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3 min

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Bad news continues for Japan’s services sector, which shrank yet again. The shrinking has been noted to be the fastest in the last five months as the resurgence in coronavirus cases induced a state of emergency in parts of the country that led to the fall of its business sector. The areas under emergency accounts for around 60% of the country’s economic output.

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The fall comes right after Prime Minister Yoshihide Suga extended a state of emergency prevailing in Tokyo and nine other areas. The extension is mainly in the country’s metropolitan areas and will continue until March 7 as the government aims to end the COVID-19 crisis that has been severely affecting the country.

The emergency was originally due to expire on Feb 7. Suga stated that the number of cases has begun to fall, however, hasn’t reached a safe point yet. The emergency was announced early in January in Tokyo, Osaka and other 9 areas. Tochigi in north of Tokyo, as the area managed to curb the infection rates.

As of now, the residents of the remaining areas cannot go out after 8:00 p.m., while bars and restaurants will be shut by that time. According to reports, the final au Jibun Bank Japan Services Purchasing Managers’ Index (PMI) dropped to 46.1 from last month’s 47.7, hitting the lowest point since August when the virus infections around the world was at a peak.

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The headline index, compared to its initial reading of 45.7, remained below the 50- neutral level, as new and outstanding business market shrank at a faster pace. The composite PMI, which includes both manufacturing and services that was recorded at 47.1 in January, came in at its lowest since September.

By the end of January, economists had forecasted Japan’s GDP to shrink by 2.5% this quarter, though other analysts see a much bigger blow. It is also noteworthy, that these economists had earlier predicted a rise. The shrink has begun to cause doubts regarding the upcoming Olympics to be held in Tokyo. Japan has not yet experienced the explosion of infections that majorly affected the medical systems in the U.S. and other European countries.

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