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Japanese services sector expands at fastest pace in nearly 2 years in May

The Japanese service sector expanded at its fastest pace in nearly two years in May, IHS Markit reported June 5.

On a seasonally adjusted basis, the headline business activity index rose to 53.0 in May from 52.2 in April; the highest since August 2015. The Nikkei Composite Output Index climbed 53.4 in May from 52.6 in the previous month to a 40-month high.

The confidence index reaching a four-year high on the back of higher demand. Service sector companies felt greater pressure on their capacity, resulting in an increase in backlogs of work and forcing companies to raise job numbers, IHS Markit said.

Input cost inflation reached a three-month high in May due to higher transport and rising wage costs. This forced companies to increase output prices. Input prices also rose but the inflation rate reached its lowest level since January.