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(Bloomberg) — Service prices among businesses in Japan stayed elevated last month, indicating sustained inflationary pressures before the impact from US tariffs kicks in, as the Bank of Japan prepares to set policy next week.
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The cost of services among companies climbed 3.1% in March, remaining above 3% for a sixth month, the longest such streak since 1991 if the effects of sales tax hikes are excluded, according to a BOJ report Thursday. The result came in slightly stronger than economists’ estimate of 3%.
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For January, the data were revised higher to 3.3%, to reflect the biggest jump in more than 33 years, excluding sales tax hike impacts.
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Services related to machinery repair, hotels and transportation were among the biggest contributors to the overall gain as businesses continue to pass on rising labor and energy costs to customers, with overseas tourists helping boost demand for accommodations.
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The data underscore the steady inflationary pressure in Japan — at least ahead of the impact from US tariff measures, in a result that by itself would back the case for the BOJ to raise interest rates once economic uncertainty clears. Governor Kazuo Ueda and his fellow board members are widely expected to keep borrowing costs at 0.5% at the conclusion of a policy gathering on May 1.
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The tariffs have altered perceptions about the outlook for BOJ policy, with economists projecting a slower pace of hikes leading to a terminal policy rate for this cycle of 1%, down from 1.25% in a survey last month.
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