More on Japan’s service-sector inflation data – will keep the BoJ on rate-hike simmer

The data post is here:

• Japan data – Services PPI (December) 2.9% y/y (prior 3%)

I got pretty caught up with Trump’s tariff talks:

• More from Trump – will place tariffs on computer chips, pharmaceuticals
• USD surging again – Trump tariff threats, Bessent want tariffs too
• Trump says DeepSeek is a positive – a ‘wake up’ call. Meanwhile USD strong still.

So, back to Japan for a bit of added info on that data.

Japan’s service-sector inflation reached 2.9% in December

• was driven by rising prices in accommodation and transportation

While its down from November, its not by much and on balance would appear to reinforce expectations of further interest rate hikes by the Bank of Japan (BOJ). not any time soon though I wouldn’t think.

The BOJ is closely monitoring service-sector inflation as an indicator of whether sustained wage growth will encourage businesses to continue raising prices, keeping inflation around its 2% target.

Last week, the BOJ raised interest rates to their highest level since the 2008 financial crisis and upgraded its inflation outlook, signaling confidence that rising wages will help stabilize inflation at the target level. More here and here (those links are to the wraps on the day of the BoJ hike, with plenty of info and links to more).

BOJ Governor Kazuo Ueda indicated that the central bank will continue raising rates as wage and price increases spread. He also noted that there is room for further hikes before borrowing costs reach a neutral level for the economy.

This article was written by Eamonn Sheridan at www.forexlive.com.