Japan’s business services price growth remains at 30-year high

Japan’s business services price growth remained at three-decade highs, supporting bets that the Bank of Japan will tighten monetary policy in the coming months.

The Bank of Japan said on Tuesday that the country’s services producer price index, a measure focused on the costs of a range of goods and services provided by companies to other companies and government agencies, rose 2.3% in November from a year earlier.

That was the second month that the index rose by this percentage, marking its fastest growth since April 1992 when excluding periods that saw sales tax increases. But the rise was slightly slower than the consensus forecast, which estimated the index to grow by 2.4%.

The Bank of Japan data showed that hotels, online advertising, and road transport were among the top sectors that contributed to the year-on-year growth rate change. Hotel prices in particular increased by 51.8% compared to the previous year on the back of a significant recovery in domestic tourism and domestic demand for travel after the pandemic era.

Japan’s key consumer price inflation measures fell in November, but service prices rose at the fastest pace since October 1993, suggesting that broader inflation may affect other factors and not just temporary cost increases.