Sentiment in Japan's service sector improved in October from a month earlier, marking the highest level since January, a Cabinet Office survey showed on Thursday.

The monthly Economy Watchers survey's diffusion index, in which a score of more than 50 means people view current economic conditions in a positive light, rose 0.9 point from September to 49.5, marking the highest level since January, the Cabinet Office said.

"Sentiment was improved by strong sales of winter clothes, such as coats at department stores and elsewhere, in line with falling temperatures," a Cabinet Office official was quoted as saying.

Based on the survey, the Cabinet Office in its latest assessment said for the third-straight month that the Japanese economy "continues to be in a moderate recovery."

The office added that a halt in natural disasters such as typhoons, floods and earthquakes in the recording period, helped the index to rise, compared to a month earlier when western Japan was battered by a strong typhoon and a strong earthquake struck Japan's northern region.

The Cabinet Office went on to say, however, that conditions in the service sector would worsen in the coming months, with the sentiment index for coming economic conditions dropping 0.7 point from a month earlier to 50.6.

The Economy Watchers Survey asks business-cycle sensitive workers their thoughts on existing and future economic conditions to provide the government with a detailed picture of economic trends in Japan.

Segments of the economy surveyed include sectors such as retail, restaurant service, and taxi driving and the monthly report serves as both a consumer confidence indicator and a leading indicator for the rest of the economy.

The improving sentiment shown in October was due to more people saying things were getting "better" or "slightly better" and less people seeing conditions as being either unchanged or "worse."

The survey was conducted between Oct. 25 and 31, and polled 2,050 workers across Japan.