Financial Services Association, May 28 (Editor Liu Rui) According to the latest data, service prices in Japan are rising at the fastest rate in more than 30 years.

This sign indicates that Japan's inflation trend is expanding, which provides a basis for the Bank of Japan to raise interest rates.

Japan's PPI growth rate rose to a new high in nearly 33 years

The Bank of Japan announced on Tuesday that the Corporate Services Price Index (CSPI), which measures the cost of a range of goods and services provided by companies to other businesses and government entities, jumped 2.8% from the same period last year.

Not only is this figure higher than economists' forecast of 2.3%, but it is also the fastest growth rate since September 1991 (excluding the period previously affected by sales tax increases).

According to the latest data, machinery repair and maintenance, IT equipment leasing, and road freight are the biggest contributors to the year-on-year increase in service prices in Japan. Hotel prices continued to rise by more than 20% year over year, but the increase was lower than last month.

The Bank of Japan emphasized that service prices are a key indicator for measuring inflation in the Japanese economy as a whole. This latest data proves that the strongest price growth in decades is taking root throughout the Japanese economy, which supports the view that Japan's inflation is sustainable.

The Bank of Japan may raise interest rates early

With the release of the latest data, the Bank of Japan may be encouraged to consider the timing of the next rate hike ahead of schedule.

Earlier, the Bank of Japan raised interest rates for the first time since 2007 in March. According to media surveys, about 41% of Bank of Japan observers expect that Japan's next rate hike may not be until October.

In the past two years, although other major central banks around the world have taken aggressive interest rate hikes and measures to curb inflation, the Bank of Japan has always been cautious and is afraid to rashly raise interest rates because after many years of deflationary conditions, they are afraid to confirm whether Japan's rising inflation can continue. For more than a decade, the Bank of Japan had been trying to create a positive wage-price cycle that would drive economic growth.

However, the Bank of Japan's cautious approach has put pressure on the yen and has kept Japan's inflation rate above the 2% target over the past two years, heightening voters' anxiety.

According to a survey conducted by Nikkei News in May this year, inflation ranks first among the policy tasks that Japanese people want Japanese Prime Minister Fumio Kishida to resolve. According to the survey, 39% of respondents believe it is necessary to take more measures to curb the rise in prices.

On Monday, Bank of Japan Governor Ueda Kazuo and Vice Governor Uchida Shinichi both said that now that Japan has gotten rid of the 0% inflation standard, there is room for a gradual increase in interest rates.

Japanese service prices are expected to continue to rise

April marks the beginning of Japan's new fiscal year and is a time for Japanese companies to adjust prices. According to Nikkei News, about 60% of the major service providers surveyed in March of this year said they would raise or consider raising prices in April.

Currently, the market expects Japanese service prices to continue to rise in the future, partly because Japanese workers have seen wage increases this year. Japan's largest trade union organization reports that in negotiations so far this year, the wages of its members have risen by more than 5%, and wages for workers in the retail and telecommunication services industries have risen above average.

The continued weakness of the yen is likely to cause Japan's prices to rise further. Ueda said earlier that companies are now more likely to pass on rising costs to consumers through price increases.

Last month, the exchange rate of the yen against the US dollar reached 160 yen again after 34 years. After meeting with Fumio Kishida earlier this month, Kazuo Ueda changed his tone when talking about the foreign exchange market, implying that the Bank of Japan would be more willing to act if the exchange rate affected inflation.

Editor/Somer