MNI BRIEF: Japan May Services PPI Rises 2.5% Vs. April 2.7%

Japan's services producer price index rose 2.5% y/y in May vs. April's 2.7%, according to preliminary data released by the Bank of Japan on Tuesday, which also showed firms transferring higher labour costs to services prices.

The May index fell due to other services (+3.3% vs. +3.6%), including hotels, although it was boosted by advertising services (+2.2% vs. +1.3%).

The services index with high labour cost ratio – the first release and linked to wages – rose 2.5% y/y in May, unchanged from +2.5% in April, while the index of services with low labour cost ratio rose 2.5% y/y in May, slowing from +2.8% in April.

BOJ officials have judged services prices continued to rise steadily and the focus is whether wage hikes decided by smaller firms will be implemented as planned and how they will affect consumption and services prices. (See MNI POLICY: BOJ Concern Grows Over Yen Impact On Wages, Prices)

The SPPI fell 0.1% m/m in May for the first drop since January after rising 0.7% in April.