Japan’s Tertiary Industry Activity Index Rises 0.3% In October

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By Bhaskar Prasad | November 12, 2012 3:21 PM EST

Japan’s tertiary industry activity index rose in October, indicating that the total value of services purchased by businesses is rising, which could give the much required support to the country’s faltering economy.

According to the data released Monday by the Ministry of Economy, Trade and Industry, Japan’s tertiary industry activity index, which is a leading indicator of the economic health of the country, rose 0.3 percent in October compared to that in the previous month, beating the analysts’ expectation that it would remain unchanged. The index rose 0.3 percent in September.

This report came after it was reported Monday that Japan's gross domestic product contracted in the third quarter compared to that in the previous quarter due to the soft global demand and the weakening domestic consumption. According to the data released by the Cabinet Office, Japan’s GDP shrank to 0.9 percent in the quarter ending September 30, down from a 0.1 percent rise in the previous three months.

A rising tertiary industry activity trend is expected to have a positive effect on the nation's currency. Meanwhile, it was reported last week that Japan's monetary base rose in October compared to that in the previous month, indicating that the monetary easing policies were leading to an increase in the amount of currency in circulation.

According to the data released Friday by the Bank of Japan, the country’s monetary base, which measures the change in the total amount of domestic currency in circulation and current account deposits held at the central bank, advanced to 10.8 percent in October, up from 9 percent rise in September. An increase in supply of money is expected to lead to additional spending, which in turn results in inflation.

The central bank has already said that Japan’s growth will remain relatively weak for the time being, affected by the prolonged state of economic slowdown in China, with the situation of the protracted European debt problem and the U.S. economy recovering only at a moderate pace.

Market participants sense that the movements toward economic recovery would pause for the time being in Japan. Since there is a risk that a further slowing down of overseas economies would exert downward pressure on the Japanese economy, investors deem it necessary for the policymakers to monitor the situation in Japan with greater vigilance.

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