Japanese Corporate Services Prices Surge at Fastest Pace since 2015, Prompting Interest Rate Hikes and Central Bank Monitoring

In April, Japanese corporate services prices rose at the quickest pace since early 2015, according to data from the Bank of Japan. This index is important for policymakers as they seek strong wages to generate sustainable demand-driven inflation, which is necessary for further interest rate hikes from the Bank of Japan following its decision in March to end negative rates.

The rise in annual prices is attributed to increasing labour costs in labour-intensive service sectors like machine repair and industrial facility renovation. On a monthly basis, service prices went up by 0.7% from March, slowing down from the previous month’s 0.9% increase. The Bank of Japan has indicated that it plans to continue raising interest rates, albeit at a gradual pace due to the fragility of the Japanese economy. The central bank is monitoring these trends closely to guide its future monetary policy decisions.