According to Bank of Japan statistics released on Tuesday, Japanese corporate services prices increased in April at their quickest rate since early 2015. This was due in part to rising labour costs in the services sector, which is encouraging for policymakers hoping for a cycle of demand growth driven by wages.

After rising 2.4% in March, the Corporate Services Price Index (CSPI) increased 2.8% year over year in April. The monthly increase in service costs was 0.7% compared to March’s 0.9% increase.

The yearly increases are a reflection of growing labour costs in labor-intensive service industries like industrial facility restoration and machine maintenance.

Policymakers keep a careful eye on the index as they search for stable wages to ignite long-lasting demand-led inflation, which is necessary for more rate rises by the Bank of Japan following its historic move in March to abolish negative rates.

For a considerable time, Japan’s low wages have posed a challenge to the promotion of sustainable consumption and wider economic expansion. However, companies have just announced the largest pay increases in decades, which is widely seen as a primary factor behind BOJ’s policy change.

The Japanese central bank has indicated that it would keep raising interest rates, although slowly due to the weak status of the country’s economy.

(Adapted from ChannelNewsAsia.com)

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