TOKYO, Sept 25 (Askume) – A key measure of inflation in Japan’s services sector held steady at 2.7% in August, data showed on Wednesday, underscoring the Bank of Japan’s view that rising wages are enough to prompt companies to push up labour hiring. The rise is offset by rising cost-of-living.
The Bank of Japan is closely monitoring services inflation to gauge whether demand-driven price increases are widespread enough to justify further interest rate hikes.
Bank of Japan data showed the service producer price index, which measures the fees companies charge each other for services, rose in August compared with the same period last year. The increase was on par with July’s revised 2.7% gain.
The increase was driven by rising prices in industries sensitive to wage increases, such as temporary staffing agencies and car repair services, the data showed.
Bank of Japan President Kazuo Ueda said he would pay special attention to October’s service industry inflation data. Japanese companies usually revise the prices of goods and services every six months.
He said this in a press conference on Wednesday
The Bank of Japan’s October service producer price index will be released on November 26, while October consumer inflation data will be released on November 22. Waiting for the release of these two data means that the Bank of Japan will not raise interest rates at its next policy meeting on October 30-31.
As Japan makes progress toward its 2% inflation target, the Bank of Japan ended negative interest rates in March and raised short-term policy rates to 0.25% in July.
Ueda said that if the inflation rate remains stable at the 2% target as predicted by the central bank, the central bank will continue to raise interest rates, but he stressed that the central bank has not yet had time to evaluate this, and only time will tell us how the uncertainty of the global economy affects Japan’s fragile recovery.
Consumer inflation data showed that ordinary rates, the price consumers pay for services, rose 2.0% annually in August after rising 1.8% in July.
