Japan's service-sector mood sours on rising cost of living

TOKYO (Reuters) - Japan's service-sector sentiment worsened in February for the second straight month, a government survey showed on Monday, a sign the rising cost of living was weighing on consumption.

An index measuring sentiment among service-sector firms, like taxi drivers and restaurants, stood at 45.6 in February, down 3.0 points from January and hitting the lowest level since July 2022, the government's "economy watchers" survey showed.

"A moderate recovery trend continues, though some weak signs are seen," the government said on service-sector sentiment. That was a bleaker view than last month, when it said sentiment continued to recover moderately as a trend.

The rising cost of living and heavy snow in some areas of Japan likely weighed on consumer sentiment, with a department store in central Japan complaining of falling visitor numbers due to cold weather, the survey showed.

A transportation firm in southern Japan said consumers were holding back on spending due to soaring fuel costs and rising prices, the survey showed.

Japan's core consumer inflation hit 3.2% in January, its fastest pace in 19 months and exceeding the Bank of Japan's 2% target for nearly three years, as companies continued to pass on rising costs through price hikes.

The rising cost of living has weighed on household spending despite steady increases in wages. Japan's inflation-adjusted real wages, which determine consumers' purchasing power, dropped 1.8% in January from a year earlier, data showed on Monday.

(Reporting by Yoshifumi Takemoto and Leika Kihara; Editing by Aidan Lewis)

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