Japan’s corporate service inflation hits nine-year high

THE price Japanese companies charge each other for services rose 3 per cent in June from a year earlier, data showed on Thursday (Jul 25), the fastest pace in more than nine years in a sign of heightening inflationary pressures.

The data comes ahead of the Bank of Japan’s (BOJ) two-day policy meeting that ends on Wednesday, when the board is likely to debate whether to raise interest rates and lay out a plan to taper its huge bond buying in coming years.

Service-sector inflation is closely watched by the central bank for clues on whether prospects of rising wages are prodding firms to hike prices and leading to broader-based inflation, a prerequisite for raising interest rates.

The increase, which followed a 2.7 per cent gain in May, was driven by higher prices for advertising, hotels and leasing, the data showed, suggesting companies were now charging more for a wide range of services.

It was the fastest year-on-year increase since March 2015.

Rising global commodity costs and the boost to import costs from a weak yen have also pushed up wholesale inflation, which rose 2.9 per cent in June, the fastest year-on-year pace since August 2023.

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The BOJ ended eight years of negative interest rates and other remnants of its massive stimulus in March, taking a landmark step towards normalising ultra-loose monetary policy.

BOJ governor Kazuo Ueda has said the central bank will raise interest rates if it becomes more convinced that Japan was on track to durably hit its 2 per cent inflation target. REUTERS