Japan's leading indicator of service inflation hits 2.6% in December

TOKYO, Jan 27 (Reuters) - A leading indicator of Japan's services sector prices rose 2.6% in December from a year earlier, data showed ?on Tuesday, a sign labour shortages continue to prod companies to pass ?on rising costs.

The increase in the services producer price ?index, which tracks the price companies charge ?each other for ?services, followed a 2.7% gain in November, Bank of Japan data showed.

Prices ?rose for labour-intensive industries ?such as hotel and construction work, the data showed, underscoring the central bank's view a tight job ?market will keep pushing ?up ?wages and service-sector inflation.

The BOJ ended a decade-long, massive stimulus programme in 2024 and in December raised short-term interest ?rates to 0.75% on the view Japan was on the cusp of durably meeting its 2% inflation target.

With consumer inflation exceeding 2% for nearly four years, the central bank has signaled its readiness to keep hiking borrowing ?costs ?if prices continue to rise steadily accompanied by higher wages.

BOJ Governor Kazuo Ueda said on Friday ?the central bank would keep a close eye on whether prospects of steady wage gains will prod more companies to pass on rising labour costs, in judging how soon to hike interest rates again.

In an analysis released on Monday, the BOJ ?said a weak yen has an increasing impact on Japan's inflation not just through higher import costs but through second-round effects such as the pass-through ?of labour costs.

(Reporting by Leika Kihara Editing by Shri Navaratnam)