Japan’s service-sector inflation accelerated in August at its fastest annual pace in more than two years, reinforcing expectations that the Bank of Japan (BOJ) could continue raising interest rates.
The services producer price index, which measures prices companies charge each other for services, rose 3.7% year-on-year in August after increasing 3.6% in July, according to data from the BOJ.
The latest increase was the fastest since June 2024 and was driven by higher freight, advertising and rental lease fees.
The data is closely watched by the BOJ for signs that companies are passing rising labour costs through to service prices, providing an indication of whether inflationary pressures are becoming more broad-based.
The BOJ raised its policy rate to 1.25% this month, the highest level in 31 years. Governor Kazuo Ueda has also signalled that the central bank remains prepared to raise borrowing costs further if necessary to prevent inflation from exceeding its target.
The stronger services inflation reading could therefore add to pressure on the BOJ to continue normalising monetary policy as it assesses the sustainability of price increases across the economy.
Reuters
