Japan Caixin services PMI rebounds in May on mild increase in new orders

Japan Caixin services purchasing managers’ index rebounded in May due to a modest rise in new orders as the leap year added to an extra day of consumption, boosting prospects of production.

The Markit/Nikkei Japan Services PMI rose to 50.4 in May from 49.3 in April on a seasonally adjusted basis. However, it reached slightly above the 50.4 mark, that distinct the line of expansion from contraction in an economy.

The index for new business rose to 50.4 from 50.2 in the previous month. The composite index for output in both manufacturing and services rose to 49.2 in May from 48.9 in the previous month, but remained in contraction territory for a third month. In 2014, services accounted for 65 percent of Japan's gross domestic product, while manufacturing had a 21 percent share.

Prime Minister Shinzo Abe officially declared on Wednesday his intentions to delay a sales tax hike by at least two-and-a-half years putting his plans for fiscal reforms on the back burner due to growing signs of weakness in the economy.

Meanwhile, market expectations are not strong enough following this rebound since this is insufficient to dispel concerns over a contraction this quarter.