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Japan's corporate service inflation steady, BOJ focusing on Oct data

Japan's corporate service inflation steady, BOJ focusing on Oct data

Japanese national flag is hoisted atop the headquarters of Bank of Japan in Tokyo, Japan, on Sep 20, 2023. (Photo: REUTERS/Issei Kato)

TOKYO: A leading indicator of Japan's service-sector inflation held steady at 2.7 per cent in August, data showed on Wednesday (Sep 25), underscoring the central bank's view that rising wages are prodding more firms to pass on higher labour costs through price hikes.

Service-sector inflation is being closely watched by the Bank of Japan for clues on whether demand-driven price gains are broadening enough to justify raising interest rates further.

The August year-on-year gain in the services producer price index, which measures the price companies charge each other for services, matched a revised 2.7 per cent gain in July, BOJ data showed.

The increase was driven by price hikes in sectors sensitive to rising wages such as temporary work agencies and car repair services, the data showed.

BOJ Governor Kazuo Ueda has said he will pay strong attention to service inflation data for October, when Japanese companies typically make biannual revisions to prices for goods and services.

"While there are some elements we can estimate in advance, we need to look at actual data to confirm" whether wage-driven rises in service prices would broaden in October, he told a news conference on Wednesday.

The BOJ's services producer price index for October is due out on Nov 26, while consumer inflation data for the month is set for release on Nov 22. Waiting for both data to come out would mean the BOJ is highly likely to forgo raising interest rates at its next policy meeting on Oct 30-31.

The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25 per cent in July on the view Japan was making steady progress towards durably achieving its 2 per cent inflation target.

Ueda has said the BOJ will keep raising rates if inflation remains on track to stably hit 2 per cent as it projects, though he stressed the bank will spend time gauging how global economic uncertainties affect Japan's fragile recovery.

Consumer inflation data showed general services, or the price consumers pay for services, rose 2.0 per cent in August from a year earlier after a 1.8 per cent gain in July.

Source: Reuters/ec
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