BOJ Rate Hikes Gain Momentum with Japan Service Inflation at Two-Year High

Japan's service-sector inflation has reached its highest level in over two years, according to data released by the Bank of Japan (BOJ) on Monday. The Services Producer Price Index (SPPI), which measures the prices companies charge each other for services, rose 3.7% year-on-year in August, up from 3.6% in July.

The increase was driven by higher freight, advertising and rental lease fees, indicating broader price pressures in Japan's economy. The BOJ has warned that underlying inflation could exceed its 2% target amid rising wage and price expectations.

In response to the latest data, the BOJ raised its key interest rate by 25 basis points to 1.25% from 1% earlier in September. This move was aimed at adjusting monetary policy as inflation and wage pressures continue to remain elevated.