Japan’s services sector just got significantly more expensive, and the ripple effects are heading straight for global markets. The country’s services producer price index rose 3.2% year-on-year in June, driven largely by freight costs that have gone vertical since the Iran conflict disrupted one of the world’s most critical shipping chokepoints.
The freight cost explosion
Ocean freight costs surged 61.8% year-on-year as of May, a figure that continued feeding into June’s services price data. International air passenger transportation costs climbed 17.3% over the same period, driven by rising fuel prices tied to tensions around the Strait of Hormuz.
The Iran conflict, which began in late February, has effectively redrawn global shipping routes. Asia-to-US container rates have roughly doubled since hostilities commenced, with insurance premiums and chartering fees in maritime shipping seeing substantial increases on top of that.
June’s 3.2% SPPI increase actually represented a slight cooling from May’s 3.3% gain. The broader producer price index told an even more aggressive story, hitting 7.1% year-on-year in June. That’s the highest reading since March 2023.
