Services prices charged between Japanese businesses rose 3.7 percent from a year earlier in September, the Bank of Japan’s preliminary Services Producer Price Index showed on Tuesday, up from a revised 3.5 percent in August. The index stood at 115.5, up 0.3 percent on the month.
The composition matters more than the headline. Ocean freight transportation prices rose 97.7 percent from a year earlier, up from 74.6 percent in August, and transportation and postal activities as a group rose 8.4 percent, contributing 1.36 percentage points of the 3.7 percent headline increase. Strip out international transportation entirely and the index rose 2.9 percent from a year earlier, unchanged from August, with labour-intensive services up 2.6 percent. Hotels rose 9.7 percent and leasing and rental 11.7 percent, while advertising services fell 5.2 percent, led by an 11.7 percent drop in television and radio advertising.
For Friday’s Bank of Japan decision, this is a neutral print dressed as a hot one. The bank is expected to hold its policy rate at 1.25 percent and to judge underlying inflation at its 2 percent target in the Outlook Report, as Sunday’s edition previewed. A domestic services measure steady at 2.9 percent, with the acceleration imported through freight rates rather than generated in wages and domestic pricing, gives the bank no new reason to bring the December hike markets price any closer, and no reason to push it away either.