TOKYO (Reuters) – An index measuring prices Japanese firms charge each other for services rose in April at the fastest annual pace in more than two years, data showed on Thursday, a sign that inflationary pressure is building broadly across the economy.
The services producer price index rose 1.7% in April from a year earlier, accelerating from a 1.3% gain in March and marking the fastest annual pace of gain since February 2022, Bank of Japan (BOJ) data showed.
The rise was driven mostly by surging overseas freight costs, but hotel, advertisement and rental fees also increased as more companies in the service industry began passing on their higher costs to customers.
The outlook for service prices will be among key factors the BOJ will scrutinise in deciding how soon it may follow other central banks in raising ultra-low interest rates.
BOJ Governor Haruhiko Kuroda has justified keeping rates low by pointing to Japan’s modest wage and service price growth, arguing the recent cost-push inflation will prove temporary unless accompanied by solid domestic demand.
“In Japan, wages have risen, but the rate of increase has remained moderate,” Kuroda said in a speech on Wednesday.
“A common challenge for each country is to determine the magnitude and persistence of the inflationary pressure. In doing so, it will be important to capture the relationship between three prices, namely, the price of goods and services, wages, and commodity prices,” he said.
(Reporting by Leika Kihara and Kentaro Sugiyama; Editing by Tom Hogue)