Japan June PMI shows services sector grows at fastest pace in nine months

TOKYO (Reuters) - Japanese services sector activity expanded at the fastest pace in nine months in June, a survey showed on Friday, suggesting

domestic demand is strengthening in the world's third-largest economy.

The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) rose to a seasonally adjusted 51.8 in June from 51.5 in May.

The index remained above the 50 threshold that separates expansion from contraction for the third consecutive month.

The index for new business rose to 52.6 from 52.2 to indicate the fastest growth in seven months.The outstanding business component of the PMI index rose to 51.3 from 50.6 in the previous month.

Strong domestic demand is essential to the Bank of Japan's drive to lift consumer inflation to 2 percent by the first half of the fiscal year 2016 and eliminate the risk of a return to nagging deflation.

Data earlier this week showed Japan's household spending rose in May for the first time in more than a year, and a robust jobs market fuelled hopes that more companies will begin lifting wages.

Other surveys pointed to an encouraging rise in business sentiment and spending plans as well.

That could signal a broader pick-up in the second half of the year after the economy seemed to have slowed sharply in spring from a strong first quarter.

(Reporting by Stanley White; Editing by Kim Coghill)