MNI BRIEF: Japan July Services PPI Rises 2.8% Vs. June's 3.1%

MNI (TOKYO) - Japan’s services producer price index rose 2.8% y/y in July, slowing from June’s revised 3.1%, showing that corporate pass-through of cost increases remained solid but the pace is slowing, preliminary data released by the Bank of Japan on Tuesday showed.

The index rose 0.3% m/m in July, accelerating from June’s 0.1%. Advertising services (+5.7% vs. +6.7%) and other services, including hotels, (+3.5% vs. +4.0%) drove the result despite a slower pace. 

The index of services with a high labour cost ratio rose 2.7% y/y in July, slowing from 3.0% in June, while the index of services with a low labour cost ratio increased 2.7% y/y in July, also slowing from 3.3% the prior month.

The data showed that firms are raising wages to ensure necessary workers on the back of continued labour shortages and they are transferring higher labour costs to retail prices, a key BOJ focus ahead of October when many businesses typically revise their retail prices. (See MNI POLICY: Volatile Markets To Delay BOJ Policy Normalisation)