Japan's Business And Service Inflation Reaches Eight Year High In FY22

Business-to-business service inflation in Japan reached an eight-year high in the fiscal year that ended in March, according to statistics released on Tuesday, indicating that inflationary pressures were spreading beyond commodities and reflecting a tight labour market and strong domestic demand.

The statistics could fuel market hopes that incoming Bank of Japan (BOJ) Governor Kazuo Ueda will gradually wind off the bank's enormous stimulus programme in the coming months.

The services producer price index, which gauges the rates companies charge each other for services, increased 1.8 percent in fiscal 2022, up from 1.2 percent the previous year, according to BOJ statistics released on Tuesday. It was the quickest rate of growth since fiscal 2014, when it increased by 3.3%.

According to the report, the index increased 1.6% year on year in March, marking the 25th consecutive month of year-on-year growth. It followed a revised 1.7% increase in February.

The increase in March was mostly driven by a comeback in inbound and domestic tourism, with hotel fees increasing 32.4 percent year on year, reflecting the government's removal of COVID-19 limits, according to the data.

The findings comes after top corporations agreed to their greatest pay hikes in a quarter-century in annual labour talks with unions in March, indicating that the country is finally shaking off the public's stuck deflationary attitude.