Service Prices Key for Japan's Inflation Outlook

Dow Jones
08/28

0639 GMT - Accelerating service prices in Tokyo signal growing momentum that could drive broader Japanese inflation well past the Bank of Japan's target, says JPMorgan economist Takuho Morimoto. Tokyo service prices rose 1.4% in August from a year earlier, government data showed Friday. However, excluding nursery fee subsidies, underlying service inflation reached 2.3%, Morimoto estimates. Medical costs and rents--historically kept low by administrative pricing and measurement lags--are now moving toward or above 2%, he says. "It would reinforce the view that underlying inflation momentum is turning higher and underscore the risk that inflation could overshoot the [BOJ's] 2% target by a meaningful margin."

 

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