[News] Japan’s SPPI Stays Strong in July, while Market Expects Further BOJ Rate Hike This Year

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The Japan Services Producer Price Index (SPPI) growth rate keeps above 2%  in July, as reported on August 27. According to the Bank of Japan, the SPPI increased by 2.8% year-on-year in July, slightly lower than the 3.1% recorded in the previous month, but the overall upward trend remains unchanged.

The primary driver of this increase was accommodation services, which experienced a year-on-year growth rate of 13.5%, contributing 1.35 percentage points to the overall SPPI increase. Other contributors included transportation, information and communications, and advertising services, which added 0.44, 0.33, and 0.24 percentage points, respectively.

Since early 2021, the SPPI year-on-year growth rate has been steadily rising, reflecting the ongoing increase in labor costs within Japan’s service sector. The Bank of Japan recently released two reports expressing concerns about wage growth and service inflation, leading the market to anticipate that the Bank of Japan may still implement another rate hike this year to curb the growth of service inflation.