Japan’s service inflation accelerates:

A key gauge of Japan’s service-sector inflation rose for the second consecutive month in September, reinforcing the Bank of Japan’s (BOJ) confidence that rising labour costs will help keep inflation near its 2% target.

Data from the BOJ showed the services producer price index, which measures prices charged between companies for services, climbed 3.0% year-on-year, up from 2.7% in August.

  • increase driven by price gains in labour-intensive sectors such as hotels and construction
  • points to persistent staff shortages and rising wage pressures.

This data has hit just ahead of the BOJ’s two-day policy meeting ending Thursday

  • BOJ policymakers are widely expected to hold short-term interest rates at 0.5%
  • the BOJ ended its decade-long stimulus programme last year

The Bank delivered its first rate hike in January, signalling growing confidence that inflation is now self-sustaining

  • consumer inflation has remained above 2% for more than three years
  • the BOJ has said it is prepared to gradually raise borrowing costs further if wage growth continues to support stable price gains.

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The data keeps the door open to gradual hikes. Persistent service-sector inflation may keep upward pressure on the yen and Japanese bond yields.

USD/JPY meanwhile is around 152.98, tracking a small range only so far today.

Source: Investing Live