TOKYO – Japan’s service-sector sentiment fell in March as rising living costs and bad weather weighed on consumption, a government survey showed, heightening uncertainty on how soon the central bank can raise interest rates again.
Consumption has been a weak spot in Japan’s fragile economic recovery as wages have yet to rise quickly enough to cushion the blow to households from rising inflation.
A diffusion index measuring how taxi drivers, restaurants and other service-sector workers saw economic conditions fell to 49.8 in March, down 1.5 point from February, the survey showed on Monday.
“While the economy continues to recover moderately as a trend, the recovery seems to be pausing,” the government said.
The diffusion index is the percentage of firms saying they saw economic conditions as good or improving, minus those saying conditions were bad or deteriorating.
The Bank of Japan (BOJ) ended eight years of negative interest rates and other remnants of its unorthodox policy last month, making a historic shift away from its focus on reflating growth with decades of massive monetary stimulus.
Governor Kazuo Ueda has signalled the chance of further interest rate hikes, saying that recent weak signs in consumption and the broader economy will prove temporary.
But household spending fell 0.5% in February from a year earlier, the 12th straight month of declines, data showed on Friday.
Japan’s real wages, a barometer of consumers’ purchasing power, fell in February for a 23rd straight month in a sign households continued to face the pinch from rising living costs.
