26-7-2023 (TOKYO) Japan’s business-to-business service inflation slowed in June, indicating that companies were slow in passing on rising labour costs despite a tight job market, according to data released by the Bank of Japan (BOJ) on Wednesday. The services produce price index, which measures the prices that companies charge each other for services, rose 1.2% in June from a year earlier, which is a slower pace compared to a revised 1.7% gain in May.
The data comes ahead of the BOJ’s meeting, which concludes on Friday, where the board will release fresh quarterly growth and inflation forecasts. The central bank is expected to maintain its current monetary policy, keeping the short-term interest rate target at -0.1% and the 10-year government bond yield target around 0%.
Despite the tight job market in Japan, companies have been hesitant to raise wages and pass on higher labour costs to customers due to sluggish demand and intense competition. This has made it challenging for the BOJ to achieve its 2% inflation target, which it has been struggling to achieve for years.
The BOJ has maintained a massive stimulus programme to support the economy and achieve its inflation target, including asset purchases and negative interest rates. The central bank has also implemented measures to support small and medium-sized enterprises, which have been hit hard by the pandemic.
