Japan's Service Sector Inflation Hits 2-Year High

A key indicator of Japan's service sector inflation has reached its fastest annual pace in over two years, according to data released by the Bank of Japan. The services producer price index rose 3.7% in August from a year earlier, following a 3.6% gain in July. This growth is attributed to increases in freight, advertising, and rental lease fees.

The Bank of Japan closely monitors this index for signs that companies are passing on rising labor costs to service-related prices. The central bank has already raised interest rates to 1.25%, the highest level since 1991, and its governor has signaled a readiness to further increase borrowing costs to prevent inflation from exceeding its target.