Japan's services producer prices climb 3.7% year on year in September

what happened

Japan's services producer price index rose 3.7% in September from a year earlier, according to data from the Bank of Japan, as reported by Reuters. August's gain was revised to 3.5%.

The Bank of Japan watches the index closely because it shows how far companies are passing higher labour costs on to the prices of services they sell to each other.

The central bank is expected to keep its policy rate at 1.25% at a two-day meeting ending Friday, but it is likely to signal readiness to keep raising borrowing costs as price pressures build.

why it matters

For markets, the key signal is the likely path of monetary policy. Persistent services price growth strengthens expectations of tighter policy, which can support the yen and move Japanese government bond yields and equities.

market impact

Yen and JGBs: strong services inflation raises expectations of further BOJ rate hikes

tags

instruments