Japan’s services inflation steady, signals wage-driven price pressure

[TOKYO] A leading indicator of Japan’s services sector prices rose 2.6 per cent in January from a year earlier, data showed on Wednesday, a sign rising wages from a tight labour market continued to pile inflationary pressure on the economy.

The increase in the services producer price index, which tracks the price companies charge each other for services, followed a 2.6 per cent gain in December, Bank of Japan data showed.

The rise was driven by higher charges for construction work and temporary staff services, the data showed.

The BOJ ended a decade-long, massive stimulus programme in 2024 and in December raised short-term interest rates to 0.75 per cent on the view Japan was on the cusp of durably meeting its 2 per cent inflation target.

With consumer inflation exceeding 2 per cent for nearly four years, the central bank has signalled its readiness to keep hiking borrowing costs if prices continue to rise steadily accompanied by higher wages.

BOJ Governor Kazuo Ueda has said the central bank would keep a close eye on whether prospects of steady wage gains will prod more companies to pass on rising labour costs, in judging how soon to hike interest rates again. REUTERS