Japan’s Service Prices Creep Up As Freight Costs Pinch Firms

Japan
FILE PHOTO: People ride on escalators at a shopping complex in Tokyo September 25, 2014. Japan’s annual core consumer inflation eased in August in another sign that the Bank of Japan could be forced into additional easing steps to meet its 2 percent price goal sometime next fiscal year. REUTERS/Yuya Shino (JAPAN – Tags: BUSINESS SOCIETY)

TOKYO ⸺ Japan’s corporate service prices rose for the second straight month in April due to a rebound in advertising and freight fees, data showed on Wednesday, a sign the economy was gradually emerging from the COVID-19 pandemic’s initial hit.

But the gain was driven mostly by fuel costs and the base effect of the previous year’s sharp drop, suggesting higher commodities and transportation prices could pinch corporate bottom lines.

The services producer price index, or the price companies charge each other for services, increased 1.0% in April from a year earlier, Bank of Japan data showed, accelerating from a 0.7% gain in March.

Property rent and advertisement fees rose in April largely in reaction to last year’s plunge caused by the outbreak of the pandemic, which triggered Japan’s first state of emergency curbs.

Ocean freight transportation prices spiked 16.5% as carriers passed on rising fuel and container costs, the data showed.

“The increase in April was due predominantly to the base effect of last year’s plunge, with scant sign of price hikes driven by domestic demand,” Shigeru Shimizu, head of the BOJ’s price statistics division, told a briefing.

“We’re not seeing strength in wage growth either,” he said.

Japan’s economy contracted in the first quarter and analysts expect any rebound in the current quarter to be modest, as renewed state of emergency curbs to combat a spike in infection hurt consumption.

Reporting by Leika Kihara; Editing by Sam Holmes; Reuters

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