Stable service inflation: Corporate service inflation in Japan remained stable in February, with an annual rate holding at 2.1 per cent. This indicates that companies are still passing on increased labour costs, buoyed by expectations of sustained wage growth.

According to data from the Bank of Japan (BOJ) released on Tuesday, the year-on-year increase in the services producer price index, which gauges charges between companies for services, remained the same as January.

BOJ's price outlook

These findings support the BOJ's belief that escalating service prices will gradually supplant cost-push inflation as a primary driver of overall price rises, thereby aiding in maintaining inflation around the targeted 2 per cent.

The BOJ closely monitors service price fluctuations as a crucial gauge of whether wage hikes and inflation are progressing in parallel, a condition it has identified as essential for considering interest rate hikes.

Last week, the BOJ made a historic departure from its unconventional policies by terminating eight years of negative interest rates and other measures aimed at revitalising the economy and combating deflation.

(With Reuters Inputs)