Service Producer Prices Rise in Japan, Keeping BOJ's Rate Hike Expectations Alive

Forex - In Japan, the leading indicator of service sector inflation, the service producer prices remained stable at around 3% in October. The stability in service producer prices reinforces the Bank of Japan's view that rising wages are prompting more firms to reflect higher labor costs through price increases. The central bank is closely monitoring service sector inflation for clues on whether demand-driven price hikes are substantial enough to warrant further increases in interest rates.

The data will be among the factors the BOJ reviews at its next policy meeting in December, with some analysts expecting a rise in rates from the current 0.25%. According to BOJ data, the service producer price index, which measures the prices companies charge each other for services, rose by 2.9% year-on-year in October, accelerating from a 2.8% increase in September. The increase in prices was attributed to services such as machinery repairs, accommodation, and construction work.