Japan's services prices rebound but outlook clouded by new COVID-19 curbs

Pedestrians wearing protective face masks make their way at a shopping district, which is less crowded than usual on the first day of the country's third state of emergency, amid the coronavirus disease (COVID-19) outbreak, in Tokyo, Japan, April 25, 2021. REUTERS/Kim Kyung-Hoon

By Leika Kihara

TOKYO (Reuters) - Japan's services prices showed signs of a pick-up in March as advertising and transportation fees rose, data showed on Monday, suggesting the economy was recovering moderately from last year's severe hit as the coronavirus pandemic took hold.

But the third state of emergency, rolled out on Sunday to combat a resurgence of new COVID-19 infections, clouds the outlook, with requests for retailers to close likely to hurt consumption.

"There might have been some pent-up demand in March that drove up prices, though there's huge uncertainty on the outlook given the new state of emergency," Shigeru Shimizu, head of the Bank of Japan's price statistics division, told a briefing.

The services producer price index, which tracks the price companies charge each other for services, rose 0.7% in March from a year earlier, BOJ data showed on Monday.

It was the first increase in six months and followed a flat reading in February.

While part of the rise was due to the base effect of last year's plunge, television and internet advertisement fees were up on demand from cellphone carriers and other services.

Cargo transportation prices also rebounded on tighter supply as airlines slashed the number of flights, the data showed.

Services prices have remained weak even as goods prices rose due to the severe blow the pandemic dealt to services consumption, adding to downward pressure from persistently slow wage growth in Japan.

Japan's core consumer prices fell for the eighth straight month in March, separate data showed on Friday, underscoring the challenge the BOJ faces in hitting its 2% inflation target.

(Reporting by Leika Kihara; Editing by Lincoln Feast.)

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