Japan's Services Inflation in November Lifts, Increasing the likelihood of a Rate Hike in 2025

 

Data released Wednesday (Dec. 25th) showed that a gauge of Japan's service-sector inflation climbed to 3.0% in November, speeding up for two consecutive months. The growth supports the central bank's view that wage increases prompt more firms to give higher prices.

 

The services producer price index, which weighs the cost of services charged between firms, rose to 109.1 in November, reaching the peak since March 1995, up from a 2.9% increase in October. The increase was attributed to higher prices for various services such as accommodation, machinery repair, and construction.

 

The BOJ raised its short-term policy rate to 0.25% in July to achieve its 2% inflation target, marking the end of its negative interest rate policy.

 

BOJ Governor Kazuo Ueda has said that the BOJ will not continue to raise interest rates unless inflation remains stable at 2%. Although the BOJ maintained interest rates in December, Ueda said he would study data on the 2025 wage outlook to judge when to raise rates. The demand-driven price growth range reflected in the service inflation indicator helps the BOJ judge whether rates should be raised.

 

A survey earlier in December showed the BOJ was expected to raise rates to 0.50% by the end of next March.

 

Moreover, former Japanese comedian Toshiya Imura and former Goldman Sachs analyst Keizo Takeiri announced their fund on Wednesday to let more Japanese benefit from the stock market. Their aim coincides with the government's efforts to channel some $6.5 trillion in household cash into financial investments.

 

The duo's new fund will start the sale on Jan. 10, with an initial investment limit of $6.36 million.

 

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