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By Leika Kihara
TOKYO, March 27 (Reuters) - Japan's business-to-business
services inflation picked up in February on a tourism rebound
and rising labour costs, data showed, offering the central bank
hope that steady wage hikes would aid in sustainably hitting its
2% inflation target.
With inflation already exceeding the 2% target due largely
to rising raw material costs, the second consecutive monthly
services acceleration may keep alive market expectations the
Bank of Japan (BOJ) will eventually whittle down its massive
stimulus under new governor Kazuo Ueda.
The services producer price index, which measures the
prices companies charge each other for services, rose 1.8% in
February from a year earlier, up from a 1.6% gain in January,
BOJ data showed on Monday.
Hotel service fees spiked 30.1% in February from a year
earlier as removal of COVID-19 restrictions boosted demand for
inbound tourism, the data showed.
Fees for services such as office cleaning, taxi and
software development also rose, reflecting higher labour costs.
"For services, the pass-through of rising costs isn't as
smooth as those for wholesale goods," said Masato Higashi, head
of the BOJ's price statistics division, told a briefing.
"But when you look closely, the pass-through (of higher
labour costs) is gradually broadening," he said.
The data came after top companies agreed to their largest
pay increases in a quarter century in annual labour talks with
union earlier this month, a sign the country may be finally
shaking off the public's sticky deflationary mindset.
The outlook for wages and services costs is crucial in
determining how soon the BOJ will tweak ultra-low interest
rates, as bank officials have said higher wage hikes must
accompany the recent cost-led inflation to contemplate an exit
from loose monetary policy.
The key will be whether smaller firms will follow their
bigger rivals in hiking pay, and whether the rise in wages will
be sustained next year, analysts say.
Mari Iwashita, chief market economist at Daiwa
Securities, said she expects the BOJ to stand pat on policy
until wage data for smaller firms become available around June
and July.
"It's a positive first step," she said of the rise in
business-to-business services prices. "But given the murky wage
outlook, a tweak to the BOJ's yield control policy won't come
until much later this year."
(Reporting by Leika Kihara; Editing by Jamie Freed)
Messaging: leika.kihara.reuters.com@reuters.net))
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