Japan Service Inflation Surges to 3.6%, Boosting Rate-Hike Bets

Japan's corporate services producer price index rose 3.6% in July from a year earlier, accelerating service inflation and increasing expectations that the Bank of Japan (BOJ) will raise its benchmark interest rate at its September monetary policy meeting.

The BOJ's corporate services price index has been steadily rising since May, with sea cargo shipping costs being a major driver of the increase. These costs soared 67.4% from a year earlier in July, the biggest jump since comparable data began in 1986. The surge was attributed to the prolonged conflict in the Middle East, which forced companies to use longer and more expensive alternative routes.

Earlier inflation readings were also revised higher by the BOJ, with April's corporate services price increase raised from an initial 3.0% to 3.6%. This revision underscores stronger-than-expected inflation pressure in Japan's services sector.