By Daniel Leussink
TOKYO (Reuters) - Japan's service sector sentiment slumped to a record low in April, a Cabinet Office survey showed on Wednesday, pointing to intensifying pressure on the economy from the coronavirus-driven lockdown measures at home and worldwide.
The 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 dropped to 7.9 from the previous all-time low of 14.2 in March.
That marked a nadir for the survey since seasonally-adjusted data became available in 2002.
The reading comes after a key economic indicator on Tuesday showed the fastest drop in nine years in March, backing other data during that month and in April that paint a darkening economic outlook.
The economy is likely to have already slipped into recession - two straight quarters of contraction - in the March quarter due to the worsening pandemic worldwide, following a slump in the final quarter of 2019, a Reuters poll showed.
Service sector businesses usually enjoy strong sales in April, which marks the beginning of the fiscal year in Japan and also sees the Golden Week holiday season starting near the end of the month.
But Wednesday's survey underscored the widespread damage inflicted by the lockdown measures to slow the virus spread, with household, corporate and employment activity components all falling to record lows, a Cabinet Office official said.
"We suspect that Japan's business surveys will recover somewhat in May as many regions start to loosen restrictions," said Tom Learmouth, Japan economist at Capital Economics, in a note to clients.
"However, severe damage has already been done and the recovery won't be immediate. We are forecasting a 7% fall in GDP this year."
While the government plans to lift the state of emergency for some prefectures that saw infection numbers stabilise, many big cities including Tokyo will likely retain current restrictions at least for the rest of this month.
The outlook index, which indicates the level of confidence in future conditions, dropped 2.2 points to a record low of 16.6 in April from 18.8 in March.
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 "worsening further" while already being "extremely severe" due to the impact from the coronavirus, the government said.
"Customer usage was extremely reduced due to the impact from the coronavirus, and our business went into a critical state," a taxi driver said, adding that he hoped supportive policy would be provided quickly.
"We think the novel coronavirus will lead to a crisis situation from now on," said a respondent from a clothing shop.
Prime Minister Shinzo Abe on Monday said the government stood ready to take additional economic support measures, on top of the record $1.1 trillion stimulus package announced in April that focuses on cash payouts to households and loans to small businesses hurt by the pandemic.