Japan’s leading indicator of service inflation perks up in September

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TOKYO (Reuters) -A leading indicator of Japan’s service-sector inflation perked up for the second straight month in September, data showed on Monday, backing up the central bank’s view that rising labour costs will help keep inflation sustainably around its 2% target.

The services producer price index, which tracks the price companies charge each other for services, rose 3.0% in September from a year earlier, Bank of Japan data showed, accelerating from a 2.7% gain in August.

The data comes ahead of the BOJ’s two-day policy meeting ending on Thursday, when the central bank is widely expected to keep interest rates steady at 0.5%.

Prices rose for labour-intensive industries such as hotel and construction work, the data showed, suggesting that labour shortages continue to push up the cost of hiring staff.

The BOJ ended a decade-long, massive stimulus programme last year and in January raised short-term interest rates to 0.5% on the view Japan was on the cusp of durably meeting its 2% inflation target.

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

(Reporting by Leika Kihara; Editing by Kim Coghill)