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The S&P Global final Japan Services Purchasing Managers' Index (PMI) edged up to 53.8 in February from 53.7 in January, marking the 11th consecutive month of expansion. The rate of expansion was the best recorded since May 2024.
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The pace of growth matched the level seen in May 2024. Readings above 50.0 indicate growth in activity, while those below point to a contraction.
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Growth was largely driven by new business, which hit its highest since April 2024. The increase was mainly attributed to stronger domestic demand as overseas demand grew at a modest pace.
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Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said: "Japan's service sector continued to expand at a solid rate in February, with firms signalling the quickest rise in sales for nearly two years."
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However, the rate of employment growth eased to a three-month low, though it remained above the long-term average. Some firms cited staff resignations and difficulties in filling vacancies as challenges to employment growth.
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Cost pressures intensified, with input prices rising sharply, prompting service providers to increase their selling prices at the fastest rate since April 2014.
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The broader picture for Japan's economy was also positive, with the Composite PMI, which includes both manufacturing and services, climbing to 53.9 in February from 53.1 in January. This marks the fastest growth since May 2023, supported by a gain in the services sector and a rise in factory output.
Source : Reuters