Japan’s business services price index hits 20-year high

TOKYO, Jan 26 (Reuters) – An index measuring the prices Japanese companies charge each other for services hit a more than two-decade high in December, a sign that inflationary pressure was underpinned by rising transport and a rebound in demand following a pandemic-induced slump.

The services producer price index rose 1.1% in December from a year earlier, marking the 10th consecutive month of increases, Bank of Japan data showed on Wednesday. The index level, at 106.0, was the highest since July 2001.

The increase was driven by rising transportation costs, with ocean freight charges jumping 38.6% in December from a year ago, the data showed, underscoring the impact of supply chain disruptions. ‘global procurement on Japan’s service costs.

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In a sign that the reopening of the economy following COVID-19 restrictions has supported demand, advertising costs rose 6.4% in December.

Japan has not been immune to global commodity inflation, with wholesale prices rising 8.5% in December from a year earlier, marking the second-fastest pace on record . Read more

But core consumer inflation stood at just 0.5% in December, well below the BOJ’s 2% target, as weak consumer spending discouraged businesses from passing on higher prices. household costs.

Policymakers say stronger wage growth would be crucial for inflation to pick up sustainably towards the BOJ’s target.

Higher wages would put further upward pressure on service prices, though many analysts doubt companies will raise wages aggressively when rising raw material costs and a resurgence in COVID-19 cases cloud perspectives.

A record wave of COVID-19 cases caused by the Omicron variant has forced Japan to expand regions under tighter restrictions, threatening the country’s fragile economic recovery. Read more

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Reporting by Leika Kihara and Kentaro Sugiyama; Editing by Kim Coghill

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