Japan’s business service prices rise at fastest annual pace since March 2015 By Reuters

TOKYO (Reuters) – Japanese corporate services prices in April rose at their fastest pace since early 2015, Bank of Japan data showed on Tuesday, boosted by labour costs in the services sector in a positive signal for policymakers looking for wages-led cycle of demand growth.

The Corporate Services Price Index (CSPI) rose 2.8% year-on-year in April, following a 2.4% increase in the previous month. For the month, the service prices rose 0.7% from March, slowing from the prior month’s 0.9%.

The annual gains reflect rising labour costs in labour-intensive service businesses such as machine repair and industrial facility renovation.

The index is closely watched by policymakers as they look for solid wages to spark durable demand-led inflation, which is a prerequisite for further Bank of Japan rate hikes after its landmark decision in March to end negative rates.

Low wages in Japan have long been a stumbling block to fostering sustainable consumption and broader economic growth. But businesses have recently delivered their biggest pay hikes in decades, seen by many as a major reason for BOJ’s policy shift.

The central bank has signaled it will continue to raise interest rates albeit at a sedate pace given the fragile state of the Japanese economy.