October - service sector sentiment falls for 3rd straight month

Sentiment in Japan's service sector fell for the third consecutive month in October as government subsidies put in place to stimulate business confidence expired the previous month, a Cabinet Office survey showed Tuesday.

The monthly Economy Watchers survey, in which a score of over 50 means people view economic conditions in a positive light, retreated from a previous reading of 41.2 in September to 40.2 in the recording period and marked the lowest reading since 38.8 marked in January this year.

According to the Cabinet Office, the end of the governments subsidy program for the purchase of eco-friendly cars and products in September, coupled with slump in demand following the tax hike on cigarettes, collectively, had a negative effect on household spending, business activity and employment conditions.

The government maintained its basic assessment of the economy from last month, stating that,"has been moderately picking up, but weak movements have been seen these days."

The government's assessment in August maintained that "while the economic climate remains tough, movements for picking up are slowing."

The overall forward-looking index, which gauges business conditions two to three months ahead, retreated to 41.1 in October from 41.4 in September, marking the first drop in two months, as the yen's persistent strength versus the U.S. dollar continues to dampen overall business sentiment and growth in the employment sector, the survey revealed.

Notably, the forward-looking index stayed below the key 50 level for the 41st straight month in October.

The Economy Watchers Survey asks business-cycle sensitive workers their thoughts on existing and future economic conditions, to provide the government with a detailed picture of economic trends in Japan.

Segments of the economy surveyed include sectors such as retail, restaurant service, and taxi driving and the monthly report serves as both a consumer confidence indicator and a leading indicator for the rest of the economy.

The headline index stood below the key 50 level -- the dividing line between net positive and net negative responses to the survey -- for the 43rd straight month in October.

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