Activity in Japan's service sector shrank for the eighth straight month in September but at the slowest pace since the coronavirus outbreak, showing a recovery trend in demand, a business survey showed on Monday.

The final Jibun Bank Japan Services Purchasing Managers' Index (PMI) rose to its highest in eight months, coming in at a seasonally adjusted 46.9 from 45.0 in the previous month. 

The headline index, while still below the 50 neutral level, was higher than a preliminary reading of 45.6, suggesting conditions were moving closer to stabilization.

"Overall, there are signs of improvement in the sector, however recovery is far from secure," said Shreeya Patel, economist at IHS Markit, which compiles the survey.

"Demand across the country remains subdued, with tourism and travel restrictions impeding new work volumes across the service sector."

The main reading was pulled down by an accelerated decline in new orders from abroad, with surveyed firms citing depressed demand conditions in export markets as well as the closure of clients' businesses.

The country's exports reported a decline of 14.8 percent in August, falling for the 21st straight month, dragged by a global demand slowdown.

Meanwhile, Japan's core consumer prices fell at their fastest pace in almost four years in August, underscoring deflation risks.

(With input from Reuters)