Japan’s modest business services price rise highlights dilemma for central bank

Japan's modest business services price rise highlights dilemma for central bank
FILE PHOTO: A shopkeeper uses a smartphone in a food store at a shopping district in Tokyo October 24, 2013. REUTERS/Yuya Shino

TOKYO : Japan’s business-to-business services prices rose 1.6 per cent in January from a year earlier, much slower than a 9.5 per cent jump in wholesale goods prices, a sign the recent pick-up in inflation is driven largely by cost-push factors rather than higher wages.

The data highlights the dilemma faced by the Bank of Japan (BOJ) as tame wage growth weighs on consumption and the broader economy, forcing the central bank to hold off raising interest rates even as inflation well exceeds its 2 per cent target.

The year-on-year rise in the services producer price index, which measures the price companies charge each other for services, followed a 1.5 per cent increase in December. It marked the 23th straight month of increase, BOJ data showed on Wednesday.

Japan’s economy averted recession but rebounded much less than expected in the fourth quarter as business investment slumped, underscoring the fragile nature of the country’s delayed recovery from the COVID-19 pandemic.

While real wages rose in December for the first time in nine months due to temporary bonus payments, household spending slid 1.3 per cent year-on-year that month in a sign of the pain consumers are feeling from the rising cost of living.

Japan’s core consumer inflation hit 4.0 per cent in December, double the central bank’s 2 per cent target, as companies continued to pass on rising energy and raw material costs to households.



Source: Reuters