A leading indicator of Japan's services sector prices rose 2.6% in January from a year earlier, matching December's gain. The data signals that rising wages from a tight labor market continue to exert inflationary pressure on the economy. Bank of Japan figures released on Wednesday highlight this trend.
TOKYO, Feb 25 (Reuters) – A leading indicator of Japan’s services sector prices rose 2.6% in January from a year earlier, data showed on Wednesday, a sign rising wages from a tight labor 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% gain in December, Bank of Japan data showed. The rise was driven by higher charges for construction work and temporary staff services.
The BOJ ended a decade-long, massive stimulus program in 2024 and in December raised short-term interest rates to 0.75% on the view Japan was on the cusp of durably meeting its 2% inflation target. With consumer inflation exceeding 2% for nearly four years, the central bank has signaled 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 labor costs, in judging how soon to hike interest rates again. "The central bank would keep a close eye on whether prospects of steady wage gains will prod more companies to pass on rising labor costs," Ueda stated, in assessing the timing for further rate increases.
These figures indicate sustained wage-driven inflation, which could influence the BOJ's future policy decisions.
