JAPAN’S annual business-to-business service inflation accelerated for the second month to hit 2.3 per cent in March, data showed on Wednesday, suggesting firms continued to pass on rising labour costs thanks to prospects for sustained wage gains.

The data underscores the Bank of Japan’s view that rising service prices will replace cost-push inflation as a key driver of price gains, and help sustain inflation around its 2 per cent target.

The year-on-year rise in the services producer price index, which measures what companies charge each other for services, followed a 2.2 per cent gain in February.

Service price moves are closely watched by the BOJ as a key indicator of whether wages and inflation are rising in tandem, which it set as one of the prerequisites for raising interest rates.

The BOJ ended eight years of negative interest rates and other remnants of its unorthodox policy last month, making a historic shift away from decades of massive monetary stimulus that was aimed at reviving the economy and quashing deflation. REUTERS