TOKYO- Japanese corporate services prices in April rose at their fastest pace since early 2015, Bank of Japan data showed on Tuesday, boosted by labor costs in the services sector in a positive signal for policymakers looking for wages-led cycle of demand growth.
The Corporate Services Price Index (CSPI) rose 2.8 percent year-on-year in April, following a 2.4 percent increase in the previous month. For the month, the service prices rose 0.7 percent from March, slowing from the prior month’s 0.9 percent .
The annual gains reflect rising labor costs in labor-intensive service businesses such as machine repair and industrial facility renovation.
The index is closely watched by policymakers as they look for solid wages to spark durable demand-led inflation, which is a prerequisite for further Bank of Japan rate hikes after its landmark decision in March to end negative rates.
Low wages in Japan have long been a stumbling block to fostering sustainable consumption and broader economic growth. But businesses have recently delivered their biggest pay hikes in decades, seen by many as a major reason for BOJ’s policy shift.
The central bank has signaled it will continue to raise interest rates albeit at a sedate pace given the fragile state of the Japanese economy.
Meanwhile, the BOJ’s key measurements of underlying inflation in April all fell below its 2 percent target for the first time since August 2022, data showed on Tuesday, heightening uncertainty on the timing of its next interest rate hike.
The weighted median inflation rate, among the three indicators closely watched as a gauge on whether price rises are broadening, rose 1.1 percent in April from a year earlier after a 1.3 percent gain in March, the data showed.
The trimmed mean index, which excludes the upper and lower tails of the price change distribution, rose 1.8 percent in April from a year earlier, slowing from the previous month’s 2.2 percent , the data showed.
A third index that measures the inflation rate with the highest density in the distribution also rose 1.6 percent in April, slowing from the previous month’s 1.9 percent gain, it showed.
