The Bank of Japan (BOJ) announced on Friday its consideration of publishing new indices aimed at providing clearer insights into the impact of labour costs on inflation in the service sector. This move is part of the central bank’s plan to enhance its services producer price index, particularly when the base year transitions from 2015 to 2020 later this year.
As part of the revision plan, the BOJ is contemplating the release of an index that monitors the price movements of services characterized by a high ratio of personnel fees to total costs, such as transportation and information services. Additionally, another index is under consideration, focusing on service prices for sectors with a low personnel fee-to-total cost ratio, including leasing, advertising, and real estate. These sectors tend to be more influenced by raw material input costs.
The central bank closely monitors service inflation as it serves as an indicator of whether wage increases are widespread enough to prompt companies to pass on higher labour costs through price hikes. BOJ Governor Kazuo Ueda has emphasized the need for both wages and service prices to witness sustained growth for inflation to reach the bank’s 2% target, aligning with the conditions for phasing out its extensive monetary stimulus.
