The services sector in Japan remained in expansion in July, albeit at a slower pace, the latest survey from Nikkei revealed on Wednesday with a PMI score of 51.2.

That's down from 51.8 in June, although it remains well above the boom-or-bust level of 50 that separates expansion from contraction.

The composite index came in with a score of 51.5 - unchanged from the previous month.

"Activity at Japanese services expanded for the fourth straight month in July, underpinned by a further expansion in new orders. In fact, growth in new business accelerated to a 26-month high, with panelists mentioning successful gains in new clients. Subsequently, employment levels increased, reversing the decline observed in the prior month," said Markit economist Amy Brownbill.

New business growth accelerated to a 26-month peak, supporting further expansions in activity and employment. Meanwhile, both input and output prices rose at sharper rates in comparison to the prior month. A rise in new work at Japanese services firms helped to boost activity growth in July, while new order growth resumed in the manufacturing sector in July.

As a result of expansions in both activity and incoming new work, pressure on capacity was recorded at Japanese services companies in July. Although moderate, the rate of accumulation in backlogs was the fastest since April. Responding to activity and new order growth, service sector providers hired additional staff in July. Firms linked greater staffing levels to business expansions and the belief that activity will increase in the future.

On the price front, input prices at Japanese services firms rose at the fastest rate since December 2014. Reports of higher staff wages, raw material costs and fuel expenses all contributed to greater cost burdens. Subsequently, service sector charges rose at the quickest rate since September last year. Finally, prospects towards service activity growth over the coming 12 months remained positive in July.

"Meanwhile, business sentiment towards activity over the coming year strengthened in July. Furthermore, the degree of confidence was the strongest since April. Several panelists mentioned expectations of new business wins and an increase in new orders as factors behind the latest optimism. Moreover, some mentioned greater demand generated from preparations related to the hosting of the Olympic Games in 2020," Brownbill said.