Demand for services fell at its fastest rate in four months in June as higher energy and food costs discouraged spending, the Ministry of Economy, Trade and Industry said Thursday.
The tertiary index, a gauge of money households and businesses spend on phone calls, power and transportation, decreased 0.8 percent from May, METI said. The median estimate in a survey of 33 economists was for a 0.3 percent drop.
A drop in spending by consumers, whose sentiment is at the lowest level in at least 26 years, contributed to the economy's contraction last quarter. Economists say Japan may slip this year into its first recession since 2001 as households cut back just as a weakening global economy hurts exporters.
"It's becoming more apparent that price increases are making consumers spend less," said Junko Nishioka, an economist at RBS Securities Japan Ltd. "Consumer spending will probably stay weak in the months ahead. Chances for a recession are increasing."
Gross domestic product contracted an annualized 2.4 percent last quarter, the Cabinet Office said Wednesday.