MNI BRIEF: Japan April Services PPI Rises 3.1% Vs. Mar 3.3%

Japan’s services producer price index (SPPI) rose 3.1% y/y in April, easing from March’s revised 3.3%, suggesting that while corporate pass-through of cost increases remains solid, momentum is slowing, preliminary Bank of Japan data showed Tuesday.

Slower gains in leasing and rental services (+1.6% vs. +2.5%) and advertising (+1.7% vs. +3.1%) weighed on April’s result. On a monthly basis, the SPPI rose 0.5% in April, following a 0.8% gain in March.

Prices for services with a high labour cost ratio rose 3.5% y/y, slightly down from 3.6% in March, while those with a low labour cost ratio rose 2.7%, easing from 3.0%.

The data indicate that firms continue to raise service prices due to elevated labour and raw material costs stemming from persistent labour shortages, though the pace of pass-through has not accelerated despite corporate price revisions.

BOJ officials remain focused on developments in services prices in and after May, when many price hikes are scheduled, as a steady increase in these prices is key to achieving the bank’s 2% inflation target sustainably. (See MNI POLICY: Spending Concerns Weigh On BOJ Hikes)