TOKYO (Reuters) – A leading indicator of Japan’s service-sector inflation hit 2.9% in December as prices rose for a broad range of services such as accommodation and transportation, data showed, keeping alive expectations of further interest rate hikes by the central bank.
Service-sector inflation is being closely watched by the Bank of Japan for clues on whether prospects of sustained wage gains will prod firms to continue raising prices, and keep inflation sustainably around its 2% target.
The December year-on-year gain in the services producer price index, which measures the price companies charge each other for services, compared with a 3.0% increase in November, BOJ data showed on Tuesday.
The BOJ raised interest rates last week to their highest since the 2008 global financial crisis and revised up its inflation forecasts, underscoring its confidence that rising wages will keep inflation stable around its 2% target.
BOJ Governor Kazuo Ueda said the central bank will keep raising interest rates as wage and price increases broaden, adding that there was scope to push up borrowing costs further before they reach levels deemed neutral to the economy.
(Reporting by Leika Kihara; Editing by Shri Navaratnam)
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