Japan's Services Sector Returns to Growth in June, PMI Shows

Japan's services sector returned to growth in June after stalling in May, a private survey showed, adding to signs of resilience in the world's third-largest economy even as headwinds persist. The final S&P Global Japan Services Purchasing Managers' Index rose to 52.2 from 50.0 in May, moving back above the 50 mark that separates expansion from contraction and signalling a renewed increase in business activity. Firms reported a pick-up in demand, though the pace of improvement was tempered by cautious sentiment. Business confidence remained subdued, weighed down by concerns over tensions in the Middle East and their impact on energy prices, as well as intensifying cost pressures that continued to squeeze margins. The reading comes as the Bank of Japan continues to normalise monetary policy after raising its benchmark rate to 1% in June, its highest level in three decades, and points to an economy still expanding despite external uncertainty. Alongside firmer business sentiment captured in other recent surveys, the services data support the case for the central bank to keep gradually tightening, though officials remain attentive to global risks and the effect of higher prices on households.