By Daniel Leussink and Leika Kihara
TOKYO (Reuters) - Japan's service sector sentiment rose in September to the highest level in 2-1/2 years, government data showed on Thursday, suggesting that the economy is gradually recovering from the devastating impact of the coronavirus pandemic.
A survey of workers such as taxi drivers, hotel workers and restaurant staff - called "economy watchers" for their proximity to consumer and retail trends - showed their confidence about current economic conditions grew 5.4 points from August to 49.3 in September.
It was the highest level since April 2018 and the fifth straight month of increase, boding well for the government's efforts to prevent a pandemic-driven recession from deepening.
"While conditions remain severe due to the pandemic's fallout, sentiment is improving," the government said on the survey. "While there are concerns over the pandemic, sentiment is likely to continue recovering," it said.
A separate private survey showed the flood of money pumped out by the government and central bank is keeping companies afloat for now, despite the hit to sales from the pandemic.
The number of corporate bankruptcies totalled 3,956 cases in the first half of the fiscal year that began in April, down 5.2% from the same period last year and the lowest level in nearly 16 years, private think-tank Teikoku Databank said on Thursday.
Total liabilities for firms that went under stood at 601.25 billion yen ($5.67 billion), the second-lowest level on record, the report from Teikoku Databank showed.
The Bank of Japan has ramped up stimulus twice so far this year and created a lending facility to channel funds via banks to cash-strapped smaller firms.
The government also deployed two massive spending packages, and offered cheap loans backed by state-affiliated lenders to help companies weather the hit from the health crisis.
Japan suffered its biggest economic slump on record in the second quarter as the pandemic crippled demand. Analysts expect any rebound to remain modest as fears of a second wave of infections weighed on consumption.