Japan's corporate service inflation accelerates to 3.1% year-on-year in January

TOKYO: A leading indicator of Japan's service-sector inflation in January accelerated to 3.1 per cent from a year earlier as prices for a wide range of services continued to rise, keeping alive expectations of further interest rate hikes by the central bank.

Service-sector inflation is being closely watched by the Bank of Japan to gauge whether prospects of sustained wage gains will prod firms to continue raising prices.

The January gain in the services producer price index, which measures the price companies charge each other for services, compared with a revised 3.0 per cent increase in December, BOJ data showed on Tuesday.

The BOJ's decision last month to raise short-term interest rates to 0.5 per cent, a level unseen in Japan for 17 years, underscored policymakers' conviction that Japan was making progress in sustainably achieving its inflation target of 2 per cent.

Governor Kazuo Ueda has signalled his readiness to keep raising rates if wages continue to increase and underpin consumption, thereby allowing firms to keep hiking pay.

Last week, separate data showed that Japan's core consumer inflation hit 3.2 per cent in January for its fastest pace in 19 months.