TOKYO, Aug 1 Reuters The Bank of Japan said on Thursday there was a chance wage and price growth could overshoot expectations as labour markets tighten.

In a full version of its quarterly outlook report, the central bank also said servicesector firms were becoming more keen to pass on rising labour costs through price increases.

There is a possibility that wage growth and inflation may overshoot, accompanied by heightening medium and longterm inflation expectations, amid a tight job market, the BOJ said in the report.

Japanese firms typically review prices for their services in April, which is the start of a new fiscal year, and October.

In April, an increasing number of servicesector firms raised prices to make up for higher labour costs, the BOJ said.

The key would be whether such changes in pricesetting behaviour broaden among servicesector firms in October, and whether the moves will be sustained, it said.

The BOJ raised interest rates on Wednesday, taking another step towards phasing out its radical stimulus due to a growing conviction that Japan is making progress towards durably achieving its 2 inflation target.

In a summary of the outlook report released on Wednesday, the BOJ maintained its projection from April that inflation would stay around its 2 target in coming years.

Reporting by Leika Kihara; Editing by Jacqueline Wong and Sam Holmes

Source Reuters