TOKYO, June 5 (Reuters) - Japan's service activity

extended robust gains in May, a private sector survey showed on

Wednesday, amid persistent inflationary pressures that have

boosted expectations for another interest rate hike this year.

The final au Jibun Bank Service purchasing managers' index

(PMI) dipped to 53.8 last month from 54.3 in April.

The index has remained above the 50-mark that separates

contraction from expansion since September 2022 and was better

than the flash reading of 53.6.

"The Japanese service sector's strong upturn was sustained

in May, with growth rates for activity and new work easing only

slightly," said Trevor Balchin, economics director at S&P Global

Market Intelligence.

Although the rate of increase slowed in May, new business

kept growing, fuelled partly by tourism and the weak yen, the

survey showed.

The volume of new work received from overseas rose at the

fastest pace since the new export subindex was launched in

September 2014, thanks to the yen's depreciation and demand from

other Asian economies.

The yen has fallen about 10% since the start of the year.

Meanwhile, the rate of input prices eased slightly in May

from last month when it hit eight-month high, but hovered well

above the average. The survey respondents cited rising wages and

higher fuel and import cost, facilitated by the weak yen, for

inflationary pressure.

Service providers passed increased costs for wages and

materials on to customers in May, with the pace of price

increases just below April's reading, which was the

third-highest in the history.

"With costs continuing to rise sharply but with demand for

services growing solidly, firms were bullish on pricing,"

Balchin at S&P Global Market Intelligence said.

The Bank of Japan, which ended negative interest rates in a

landmark decision in March, is expected to hike rates again this

year. The central bank has signalled a cautious approach to

further tightening due to a fragile economic recovery.

The composite PMI, which combines the manufacturing and

service activity figures, increased to 52.6 in May, the

joint-highest level since August 2023, from 52.3 in April.