Japan's tourism restart stirs hope of service-sector recovery

Japan's services sector activity growth posted a small expansion in September as demand recovered on declining COVID-19 cases and the prospect of easing restrictions on foreign tourism boosted hopes of a stronger economic revival.

Prime Minister Fumio Kishida this week pledged to raise inbound tourism spending to more than 5 trillion yen ($34.52 billion) a year, hoping to benefit from windfalls brought by the yen's recent fall to a 24-year low against the dollar.

The final au Jibun Bank Japan Services purchasing managers' index (PMI) rose to a seasonally adjusted 52.2, returning to growth after posting a contraction of 49.5 in August.

The figure was largely in line with a 51.9 flash reading for September unveiled last month. The 50-mark separates expansion from contraction.

Japan will loosen its border policies from Tuesday next week, dropping a cap on daily arrivals among other rules, as it hopes the yen's sharp decline against the dollar and other major currencies this year will help lure tourists.

"The announcement that restrictions on foreign tourism will be lifted from October should ... help support greater economic activity levels across Japan," said Joe Hayes, senior economist at S&P Global Market Intelligence, which compiles the survey.

"Yen weakness is also leading to imported inflation and is another reason why the relaxation of travel restrictions will be welcomed," Hayes added.