Japan July services PMI slows slightly in sign of subdued activity

TOKYO, (Reuters) - Activity in Japan's services sector cooled slightly in July from the previous month as new orders grew at a slower pace, a private survey showed on Friday, suggesting the economy may have lost some momentum at the start of the third quarter.

The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) fell to 51.3 on a seasonally adjusted basis from 51.4 in June, though it has remained above the 50 threshold that separates expansion from contraction for the 22nd consecutive month.

Slower growth in new business and outstanding business suggests somewhat subdued activity, which was backed by a separate survey earlier this week on Japanese manufacturing activity.

That showed factory activity grew less than initially reported last month, and there were lingering concerns about the economy due to the reduced pace at which new orders increased.

"Business activity has risen in successive months for almost two years, although the latest reading on the headline figure points to a relatively weak rate of expansion," said Joe Hayes, economist at IHS Markit, which compiles the survey.

The composite PMI, which includes both manufacturing and services, fell to 51.8 from 52.1 in June.

Japan's economy is expected to have bounced back in the second quarter after a contraction in the first quarter, but a U.S.-driven international trade dispute is a risk to growth, economists say.

Japan's exports to the United States fell for the first time in 17 months and Japanese business sentiment soured amid worries about U.S. President Donald Trump's "America First" protectionist trade policies.

The recent batch of data highlighted concerns that the export-reliant economy, the world's third biggest, could take a hit if Trump resorts to tariffs or other protectionist measures to fix trade imbalances with Japan.

(Reporting by Stanley White; Editing by Shri Navaratnam)