Japan's B2B Inflation Remains Stable at 2.1%

Japan's annual business-to-business service inflation remained steady at 2.1 percent in February, indicating that companies continued to pass on increasing labor costs, buoyed by expectations of sustained wage growth. The year-on-year increase in the services producer price index, which measures the charges between companies for services, remained unchanged from January, as per data released by the Bank of Japan (BOJ) on Tuesday.

This data highlights the BOJ's perspective that the uptick in service prices will gradually replace cost-push inflation as a primary driver of overall price increases, thereby supporting inflation levels around its 2 percent target.

Service price movements are closely monitored by the BOJ as they serve as a crucial indicator of whether wages and inflation are rising in tandem, which the central bank has identified as a prerequisite for considering any adjustments to interest rates.

The BOJ's recent decision to end eight years of negative interest rates and other unconventional policies marks a significant shift away from prolonged monetary stimulus aimed at stimulating economic growth and combating deflation.