The Reuters Tankan sentiment index for manufacturers fell to 5 in May from 11 a month earlier, its lowest since February last year. The service index rose to 13 from 8, hitting its highest since February 2020.

The monthly poll, which tracks the Bank of Japan’s (BOJ) closely watched “tankan” quarterly survey, found confidence was likely to become less optimistic for both manufacturers and non-manufacturers over the coming three months.

The service-sector mood recovered to its most positive level since the start of the COVID-19 pandemic in early 2020 as the world’s third-largest economy shook off more of the drag from the coronavirus, which has made consumers cautious about spending.

The poll of 499 big and mid-sized companies conducted from April 26 to May 13, of which 236 responded, showed firms faced headwinds from persistently high raw material costs and Chinese coronavirus lockdown measures.