Japan’s service sector expansion slowed in September. Business activity lost momentum, export demand weakened, and earthquake disruptions cut foot traffic across regional consumer hubs.

The final S&P Global Japan Services Purchasing Managers’ Index fell to 51.3 in September from a five-month high of 52.5 in August. That missed the preliminary flash estimate of 51.6. Still, the index remained above the 50-mark threshold separating sector expansion from contraction.

New orders across service providers rose for a 27th consecutive month, supported by domestic customer traffic and local consumption. Overall order growth moderated from August. Fresh export business dropped at the second-steepest rate recorded since January 2021.

Earthquake disruptions during the month forced temporary pauses in regional travel and hospitality bookings, reducing transactions across retail and leisure locations. Local shoppers continued to buy. In contrast, foreign client orders dried up across business-to-business and cross-border services.

“PMI survey data pointed to a softer expansion of Japan’s service sector as the third quarter drew to a close, with businesses signalling slower increases in business activity and new orders,” said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence.

Hiring across service businesses rose for a 13th straight month to log its quickest pace of workforce expansion since February. Service operators added staff aggressively to fill floor vacancies and build operational capacity ahead of the final quarter.

Despite faster recruitment, backlogs of outstanding work climbed at the sharpest rate in seven months. Hospitality, food service, and transport providers in urban centres continued to struggle with customer volumes on existing staffing levels.

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