Japan's services prices rise for 7th straight month on freight cost gains
By Leika Kihara
TOKYO, Oct 26 (Reuters) - The prices that Japanese companies charge each other for services rose 0.9% in September from a year earlier to mark a seventh straight month of gains, a sign inflationary pressure is building mostly on global supply constraints.
There is uncertainty, however, on whether firms will pass on higher costs to households as demand is yet to show signs of a pick up since emergency COVID-19 curbs were lifted on Sept. 30.
The increase in the services producer price index was just below a 1.0% gain marked in August, Bank of Japan (BOJ) data showed on Tuesday.
The key driver behind the September rise was transportation fees, suggesting that surging global demand and supply bottlenecks are hurting corporate profits.
The cost of ocean freight transportation spiked 34.9% in September from a year earlier, the biggest rise since 2008.
Air freight fees were also up 28.5% in September, faster than a 19.6% gain in August.
"The impact of higher oil costs comes with a lag so if oil prices continue to rise, we might see further hikes in freight transportation fees," Shigeru Shimizu, head of the BOJ's price statistics division, told a briefing.
Hotel fees, by contrast, fell 8.4% on sliding demand after the end of the Tokyo Olympic Games. The rise in advertisement fees also slowed to 7.2% in September from 9.7% in August, in a sign of sluggish domestic demand.
Japan has not been immune to global commodity inflation, with wholesale prices surging to a 13-year high of 6.3% in September, putting pressure on corporate profit margins and raising the risk of unwanted consumer price hikes.
But consumer inflation has been stuck around zero as firms remain reluctant to pass on costs to households, reinforcing expectations the BOJ's 2% target will remain elusive.
(Reporting by Leika Kihara; Editing by Himani Sarkar)
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