Japan's corporate service inflation hits 3.3% in May

TOKYO (Reuters) -A leading indicator of Japan's service-sector inflation hit 3.3% in May, data showed on Wednesday, keeping alive expectations of further interest rate hikes by the central bank.

Service-sector inflation is being closely watched by the Bank of Japan for clues on whether prospects of sustained wage gains will prod firms to continue raising prices, and keep inflation sustainably around its 2% target.

The May year-on-year gain in the services producer price index, which measures the price companies charge each other for services, followed a revised 3.4% increase in April, BOJ data showed.

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.

While the central bank has signalled readiness to raise rates further, the economic repercussions from higher U.S. tariffs forced it to cut its growth forecasts and complicated decisions around the timing of the next rate increase.

A slight majority of economists in a Reuters poll expected the BOJ's next 25-basis-point increase to come in early 2026.

(Reporting by Leika Kihara; Editing by Sam Holmes)

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