Japan’s demand for services unexpectedly dropped in May as an unemployment rate at a five- year high discouraged households from spending.
The tertiary index, a gauge of money households and businesses spend on phone calls, power and transportation, fell 0.1 percent from April, when it rose 2.2 percent, the Trade Ministry said today in Tokyo. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.4 percent gain.
Declining profits are forcing companies cut costs and fire workers, which pushed the jobless rate to 5.2 percent in May health insurance quotes. The Bank of Japan yesterday cut its growth forecast for the year ending March 31 and said consumer spending “remains generally weak.”
“The job and income environment remains severe,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “They will keep suffering from cost cuts.”
The yen traded at 94.26 per dollar at 8:57 a.m. in Tokyo from 94.32 before the report was published.