(Bloomberg) — Service prices, a key component of Japan’s inflation data, are sustaining momentum, adding to the case for the Bank of Japan to take another step before too long toward policy normalization. Rising prices for everything from haircuts to dry cleaning show that underlying consumer price trends may be sturdier than in the past. About 60% of major service providers surveyed in March said they would lift their prices or consider doing so in April, according to the Nikkei newspaper.
“Prices of some service items which had barely moved in the past have recently risen by 1% or so, confirming the positive development that the BOJ has cited,” said Hiroshi Kawata, a senior economist at Mizuho Research & Technologies. BOJ Governor Kazuo Ueda said this month that service inflation is strengthening. Authorities have indicated the trend would be a key factor determining whether the bank can mull more rate hikes as Ueda seeks to confirm the emergence of a positive wage-price cycle that generates demand-led inflation.
“The trend in service inflation could be a very significant trigger for the BOJ’s potential policy changes,” said Seisaku Kameda, executive economist at Sompo Institute Plus. “I wouldn’t be surprised at all to see additional small rate hikes as early as July, and even if not, by mid-year thereafter.” April data set to be released Friday will provide the next clues.
As the month marking the start of a new fiscal year, April is a point when compan.