The tertiary sector in Japan experiences a significant surge with a monthly gain of 0.9%, surpassing expectations.

• In July 2023, the tertiary sector in Japan records remarkable year-on-year growth of 2.7%, indicating a significant surge in performance.
• The monthly data brings a surprise as it shows a higher than expected increase of 0.9%.
• The revival of the sector can be attributed to the strong growth in personal and business services, which have been instrumental in driving its recovery.

 Tertiary Industry Flourishes with Strong July 2023 Growth

The recent release of the Indices of Tertiary Industry Activity for July 2023 reveals an impressive resurgence and resilience in Japan's tertiary sector. Key takeaways from the report highlight significant monthly gains, led by personal and business services. Various factors contributed to this sectoral surge, with some challenges observed in specific industries. Nevertheless, the short-term outlook remains optimistic, with the tertiary industry poised for continued expansion.

Impressive Monthly Gains

July 2023 exhibited substantial growth in the tertiary sector, surpassing expectations. The seasonally adjusted index rose to 101.8, indicating a 0.9% increase compared to the previous month. The original index stood at 101.4, representing a notable 2.7% year-on-year growth.

Personal and Business Services Lead the Charge

Personal Services and Business Services played crucial roles in driving the sector's revival. Personal Services experienced a modest monthly increase of 0.3% and a 2.6% annual growth. Meanwhile, Business Services surged by 1.5% monthly and 2.6% year-on-year, highlighting the resilience of consumer-centric and professional services.

Driving Forces Behind the Resurgence

Several industries contributed to the positive growth of the tertiary sector. Transport and Postal Activities, particularly Road Freight Transport, saw a significant monthly increase of 6.9% and a 5.7% year-on-year growth. Other industries such as Retail Trade, Electricity, Gas, Heat Supply, and Water, Real Estate, Finance and Insurance, and Living and Amusement-related Services also made positive contributions.

Challenges in Certain Sectors

While the overall sector outlook is positive, some areas faced challenges. Business-related Services observed a minor monthly dip of -0.8%, primarily due to changes in Technical Services and Employment and Worker Dispatching Services. Medical, Health Care, and Welfare, as well as the Information and Communications sectors, also experienced slight declines. Goods Rental and Leasing remained stable but faced a year-on-year decrease of -1.4%.

Short-term Outlook: Promising

The outlook for the tertiary sector in the short term remains optimistic. The sector's robust growth across various industries, coupled with growing consumer and business confidence, indicates continued expansion. While challenges persist in specific sectors, the overall trajectory reflects recovery and progress, reaffirming the sector's resilience in navigating economic dynamics.