TOKYO Japan's service sector activity expanded at a record pace in May, a private-sector survey showed on Monday, thanks to a recovery in overseas demand and a surge of foreign tourists as pandemic restrictions were eased further.

The final au Jibun Bank Japan Services purchasing managers' index (PMI) rose to a seasonally adjusted 55.9 last month from the previous peak of 55.4 in April.

That compared with the flash reading of 56.3 and was well above the 50-mark that separates expansion from contraction for a ninth straight month.

"Firms were buoyed by the easing of the few remaining pandemic restrictions and have noted strong increases in demand, notably from overseas and inbound tourism," said Usamah Bhatti, economist at S&P Global Market Intelligence.

"The upward trend looks set to continue in the near and medium term," as outstanding business expanded at a record rate and business optimism held near an all-time high.

The government has scrapped strict pandemic-related border controls and reclassified COVID-19 to the same level as seasonal flu.

The number of foreign visitors to Japan climbed to a post-pandemic high of nearly 2 million in April.

The subindex measuring outstanding business rose at the fastest pace on record as disruptions caused by the pandemic continued to wane.

Business expectations for the coming year remained robust, though the pace of increase slowed slightly from April, the survey showed.

Service sector companies hired more workers for the fourth month in a row, with the rate of job creation the second fastest since September 2007.

Input prices and prices charged for services continued to rise but at a slower pace than in April.

The composite PMI, which combines the manufacturing and services activity figures, expanded at the fastest pace since October 2013. The index advanced to 54.3 in May from 52.9 in April, staying above the break-even 50 mark for the fifth straight month.

(Reporting by Kaori Kaneko; Editing by Kim Coghill)