Japan’s corporate services inflation accelerated in July, adding to signs that price pressures are broadening across the economy and strengthening the case for the Bank of Japan (BOJ) to raise interest rates.
The services producer price index, which measures the prices companies charge each other for services, rose 3.6% year-on-year in July, up from a revised 3.4% increase in June, data from the BOJ showed on Wednesday.
The latest reading adds to evidence that a tight labour market is encouraging businesses to pass higher costs on to consumers, supporting the central bank’s view that inflation is becoming more entrenched.
Japan’s core consumer inflation also accelerated in July from a year earlier, with firms passing on higher import costs linked to the weak yen as well as the impact of the US-Israeli war with Iran.
The stronger services inflation reading comes as markets increasingly focus on the timing of the BOJ’s next rate increase. Reuters reported that sources expect the central bank could raise rates as early as September, with the possibility of more aggressive increases thereafter.
The BOJ is currently raising rates at a pace of roughly twice a year, with further tightening dependent on the persistence of inflation and the strength of wage and price pressures.
Reuters
