— Japan Apr Total CSPI Posts 31st Straight Y/Y Drop; Mar -1.2%
— Japan Apr Core CSPI (Ex Intl Transport) -0.7% Y/Y; Mar Rev -1.1%
— Japan Apr Total CSPI -0.1% M/M Vs Mar Unrevised +0.4%
— Japan Apr Core CSPI -0.4% M/M Vs Mar Revised +0.4%

TOKYO (MNI) – Japan’s corporate service price index fell 0.8% in
April from a year earlier, the 31st consecutive year-on-year drop, with
the pace of decline decelerating from the 1.2% fall in March, Bank of
Japan data released on Thursday showed.

The 0.8% fall is the smallest year-on-year drop since -0.2% marked
in October 2008, when the current downtrend in CSPI began after the
collapse of Lehman Brothers in the previous month, the data showed.

The smaller year-on-year drop in April was mainly due to annual
revisions made to service prices while higher costs also supported CSPI,
a BOJ official told reporters.

The official also said that the impact of the March 11 earthquake
disaster on the April CSPI was limited as there were both upward and
downward contributions.

He noted that prices for construction machinery and equipment rose
in the aftermath of the disaster but that accommodation and advertising
costs fell.

The CSPI, which stood at 96.5 in April against 100 in the 2005 base
year, was down 0.1% from the previous month, posting the first m/m fall
in three month after an unrevised +0.4% in March.

The smaller y/y drop in April compared with the drop in March was
caused by positive contributions from other services including plant
engineering (+0.25 point), transportations (+0.12 pt), leasing and
rental (+0.11 pt), information and communications (+0.06 pt) as well as
finance and insurance (+0.03 pt).

They outpaced negative contributions from advertising services
(-0.13 pt).

The downward pressure on prices has generally eased since total
CSPI posted 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, which excludes the volatile international transportation
category, dropped 0.7% year-on-year in April, the 30th consecutive y/y
decline, after falling a revised 1.1% in March.

From the previous month, the core CSPI fell 0.4% in April, posting
the first month-on-month drop in three months, after rising a revised
0.4% in March.

The index for transportation, which accounts for about 21% of the
total index weighting and thus has a large impact on the headline index,
was down 0.3% year-on-year in April after falling a revised 0.8% in
March.

Within this category, road freight transportation fees fell 1.2% on
year (vs. -1.2% in the previous month), while ocean freight
transportation costs fell 0.4% (vs. -4.5% the previous month).

The index for advertising services (weighting: 6.85%), which
includes TV commercials, fell 2.9% on the year, following a 0.7% fall in
March.

The index for information and communications, including software
development and mobile phone charges (weighting: 21.65%), dropped 0.9%
on the year, improving from -1.3% in March.

The index for finance and insurance (weighting: 5.91%) rose 0.5% on
year after declining 0.1% 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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