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Japan's March service sector sentiment slumps to record low on coronavirus woes

By Daniel Leussink

TOKYO (Reuters) - Japan's service sector sentiment hit a record low in March, as the coronavirus crisis prompted travel bans and hurt consumption in a major shock to the economy.

The survey of workers such as taxi drivers, hotel and restaurant staff - called "economy watchers" for their proximity to consumer and retail trends - showed their confidence about current economic conditions falling by 13.2 points to 14.2 from 27.4 in February.

That marked the lowest on record since seasonally-adjusted data became available in 2002.

The economy is expected to have already have slipped into a recession - two straight quarters of contraction - in the March quarter due to the worsening COVID-19 pandemic, following a slump in the final quarter of 2019.

The outlook index, which indicates the level of confidence in future conditions, dropped 5.8 points to 18.8 in March from 24.6 in February.

A survey reading above 50 indicates respondents think conditions are improving compared to three months earlier, while a reading below 50 indicates pessimism.

The index showed conditions were "extremely severe" due to the impact from the coronavirus, the government said.

"Overseas travel is in a catastrophic state. Due to the impact from self restraint, the number of customers isn't rising domestically either," said a respondent from a travel agency.

A respondent from a luxury restaurant said that the pandemic has driven customer numbers down by about 70%.

"Corporate entertainment, cross-industry meetings and in-house goodbye parties have been cancelled across the board," the respondent said.

"To be honest figure were low for all regions this time," a Cabinet Office official told reporters, adding that some survey respondents said they had seen business decline up to 90% from previous levels.

The survey was conducted before Prime Minister Shinzo Abe declared a state of emergency on Tuesday that is expected to paralyse activity in major cities.

"The food and beverage component fell from 16.0 to a surreal 0.7 – about as low as it can possibly get," said Tom Learmouth, Japan economist at Capital Economics.

Separate private-sector data on Wednesday showed bankruptcies rose 11.8% in March, growing for a seventh straight month, with 12 firms going bust due to falls in demand amid the coronavirus crisis.

Japan's cabinet on Tuesday approved a stimulus package of almost $1 trillion on Tuesday that includes 39.5 trillion yen ($363 billion) in direct fiscal spending, largely to offset the immediate damage from the pandemic.

(Reporting by Daniel Leussink; Editing by Shri Navaratnam)

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