JAPAN’S annual business-to-business service inflation held steady at 2.1 per cent in February, suggesting companies continued to pass on rising labour costs thanks to prospects for sustained wage gains.

The year-on-year rise in the services producer price index, which measures what companies charge each other for services, was unchanged from January, Bank of Japan (BOJ) data showed on Tuesday (Mar 26).

The data underscores the BOJ’s view that rising service prices will start to replace cost-push inflation as a key driver of price gains, and help sustain inflation around its 2 per cent target.

Service price moves are closely watched by the BOJ as a key indicator of whether wages and inflation are rising in tandem, which it set as one of the prerequisites for raising interest rates.

The BOJ ended eight years of negative interest rates and other remnants of its unorthodox policy last week, making a historic shift away from decades of massive monetary stimulus that was aimed at reviving the economy and quashing deflation. REUTERS