Japan’s corporate service inflation hits 3.0%, keeps BOJ rate hike bets alive

[TOKYO] A leading indicator of Japan’s service-sector inflation hit 3.0 per cent in February, data showed on Wednesday, keeping alive expectations of further interest rate hikes by the central bank.

Service-sector inflation is being closely watched by the Bank of Japan for clues on whether prospects of sustained wage gains will prod firms to continue raising prices, and keep inflation sustainably around its 2 per cent target.

The February year-on-year gain in the services producer price index, which measures the price companies charge each other for services, slowed from a revised 3.2 per cent increase in January, BOJ data showed.

The BOJ raised its short-term policy rate to 0.5 per cent in January on the view Japan was on the cusp of sustainably achieving its 2 per cent inflation target backed by solid wage gains.

BOJ Governor Kazuo Ueda said the central bank will keep raising interest rates if prospects of higher wages lead to broader price hikes, not just for goods but for services.

A Reuters poll showed many analysts expect the BOJ’s next rate hike to come in the third quarter, most likely in July. REUTERS