Japan's Service Sector Inflation Hits Two-Year High Amid Broadening Pressure

A key measure of Japan's service sector inflation has hit a two-year high, according to data released by the Bank of Japan on Monday. The services producer price index (SPI) rose 3.7% in August from a year earlier after a 3.6% gain in July.

The increase in August reflected rising freight, advertising, and rental lease fees, indicating broadening inflationary pressure. This is the fastest year-on-year pace since June 2024.

The Bank of Japan closely monitors this data for clues on how companies are passing on rising labor costs to service-related prices. The central bank raised interest rates to a 31-year high of 1.25% this month and signaled its readiness to push up borrowing costs further to prevent inflation from overshooting its target.