On December 25, 2024, data released by the Bank of Japan indicated that the service-sector inflation rate rose to 3.0% in November, marking the second consecutive month of acceleration. This increase supports the central bank's assessment that rising wages are prompting more businesses to transfer higher costs to consumers.
The year-on-year rise in the services producer price index, which reflects the prices companies charge one another for services, increased from 2.9% in October. The index now stands at 109.1, the highest level recorded since March 1995.
This surge is attributed to escalating prices across various services, including accommodation, machinery repair, and construction. The Bank of Japan had previously ended its negative interest rate policy in March and adjusted the short-term policy rate to 0.25% in July, believing that the country was steadily progressing toward achieving its 2% inflation target.
Governor Kazuo Ueda stated that the BOJ would continue to raise rates if inflation remains on track to meet the target. Although the bank opted to maintain current rates in December, Ueda emphasized the importance of monitoring data on next year's wage growth to determine the timing of any future rate increases.
A Reuters poll conducted earlier this month revealed that all participants expect the BOJ to increase rates to 0.50% by the end of March. The next monetary policy review is scheduled for January 23-24, with another meeting planned for March 18-19.