TOKYO, May 7 Reuters Japanese service sector activity grew at the fastest pace in eight months in April thanks to solid business and consumer spending, a private survey showed on Tuesday, results that should keep the central bank on track to hike rates again this year.

The final au Jibun Bank Service purchasing managers39; index PMI rose to 54.3 last month, the highest level since August 2023, and up slightly from 54.1 in March.

The index has remained above the 50mark that separates contraction from expansion since September 2022, but it edged down from the flash reading of 54.6.

The survey showed prices charged by firms to their clients increased sharply, with the rate of inflation hitting its highest since April 2014 when the nation raised the sales tax.

The firms cited rising expenses from higher wages as the main reason for passing on costs to customers, a fact that won39;t be lost on the Bank of Japan which has for years urged firms to raise pay at a steady pace to spur consumption.

The BOJ, which ended negative interest rates in a landmark decision in March, is expected to hike rates again this year. The central bank has signalled a cautious approach to further tightening due to a fragile economic recovery.

The service sector has been a bright spot in an economy that has struggled to mount a broadbased postCOVID revival, helping to offset some of the persistent weakness seen in manufacturing.

For policymakers, the strength in business and consumer spending in…