— Japan Sep Core CSPI (Ex Intl Transport) -1.2% Y/Y; Aug -1.1%
— Japan Sep Total CSPI -0.1% M/M Vs Aug -0.4%
— Japan Sep Core CSPI -0.1% M/M Vs Aug -0.3%

TOKYO (MNI) – Japan’s corporate service price index fell 1.1% in
September from a year earlier, the 24th consecutive year-on-year drop,
with the pace of decline being unchanged for three months, Bank of Japan
data released on Tuesday showed.

The total CSPI, which stood at a record low of 96.7 in September
against 100 in the 2005 base year, was down 0.1% from the previous month
after falling 0.4% in August. It was the third consecutive m/m drop.

The pace of year-on-year drop was unchanged in September vs. August
as the upward contributions from transportation (+0.09 point) and
leasing and rental (+0.06 pt) were offset by the downward contributions
from advertising services (-0.06 pt) and other services (-0.03 pt).

Economists expect the year-on-year decline in CSPI to moderate in
the coming months as downward pressure on CSPI will be eased by firm
international commodity prices, which push up transportation costs.

The downward pressure on prices has eased generally since the total
CSPI hit a record drop of -3.8% in August 2009, which was the largest
decline since the BOJ began compiling CSPI data in January 1985.

Core CSPI excluding international transportation, a fairly new
measure free of volatile factors, dropped 1.2% year-on-year in September
after falling by 1.1% in August.

Month-on-month, the core CSPI was down 0.1% in September after
falling 0.3% in August. It was the third consecutive m/m drop.

The index for transportation, which accounts for about 21% of the
index weighting and thus has a large impact on the headline index, was
up 0.3% year-on-year in September after falling 0.1% in August.

Within this category, ship chartering fees fell 3.2% year-on-year
(vs. -7.7% in the previous month), while ocean freight transportation
costs rose 1.0% (vs. a revised -2.6% the previous month).

The index for advertising services (weighting: 6.85%), which
includes TV commercials, fell 2.2% on the year, following a revised 1.3%
fall in August.

The index for information and communications, including software
development and mobile phone charges (weighting: 21.65%) dropped 0.7% on
the year, after falling 0.6% in the previous month.

The index for finance and insurance (weighting: 5.91%) slipped 1.1%
on the year after falling a revised 1.2% in the previous month.

The corporate services price index tracks prices for a wide range
of corporate services, ranging from finance and insurance charges to the
cost of shipping goods by road rail, air or sea.

It also includes software development costs, telecommunications
charges and legal and accounting fees.

In 2009, the BOJ changed the base year for its corporate service
price index to 2005 from 2000, which takes place every five years, while
reshuffling the services covered in the data to reflect more high-tech
and diversified business activity, effective September 2009 data.

Under the 2005 base year, the total CSPI hit a recent peak of 102.0
in July 2008, when demand from China to import iron ore and coal ahead
of the Beijing Olympics peaked, pushing up global ship chartering and
freight charges.

By contrast, the core CSPI was largely leveling off in several
months through July 2008, when it was only at 99.6.

The change is designed to boost the accuracy of the indicator
following technology innovation. Both the government and the BOJ
routinely change the base year for the price data they compile to
mitigate the upward bias typically found the further the data is from
the base year.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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