Overheating in services adds to case for tighter policy

The Tankan revealed that capacity shortages in the services sector are now just as pronounced as they were before the pandemic. The survey also suggested that inflationary pressures in non-manufacturing are only abating very slowly even as import prices have plunged. While the Bank of Japan is unlikely to make any policy changes at its upcoming meeting, the strength of the services sector should convince it to abandon negative interest rates early next year.