— Japan Jan Total CSPI Posts 28th Straight Y/Y Drop
— Japan Jan Core CSPI (Ex Intl Transport) -1.0% Y/Y; Dec -1.3%
— Japan Jan Total CSPI -0.3% M/M Vs Dec -0.2%
— Japan Jan Core CSPI -0.3% M/M Vs Dec -0.2%

TOKYO (MNI) – Japan’s corporate service price index fell 1.1% in
January from a year earlier, the 28th consecutive year-on-year drop,
with the pace of decline decelerating from the 1.3% fall in December,
Bank of Japan data released on Wednesday showed.

The total CSPI, which stood at 96.1 in January against 100 in the
2005 base year, was down 0.3% from the previous month, posting the
second consecutive monthly fall.

The larger y/y drop in January compared with the drop in December
was caused by downward contributions from transportation (-0.09
percentage point), leasing and rental (-0.04 pt) and real estate
services (-0.01 pt).

They outpaced upward contributions from advertising services (+0.13
pt), other services, including civil engineering design services (+0.07
pt), information and communications (+0.05 pt) and finance and insurance
(+0.03 pt).

The downward pressure on prices has eased generally 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.

Total CSPI had improved to -0.7% in May 2010, its recent peak.

Core CSPI excluding international transportation, a fairly new
measure free of volatile factors, dropped 1.0% year-on-year in January
posting the 27th consecutive y/y decline, after falling 1.3% in
December.

From the previous month, the core CSPI fell 0.3% in January, after
falling 0.2% in December.

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 0.8% year-on-year in January after falling 0.4% in December.

Within this category, road freight transportation fees was flat on
year (vs. -0.2. in the previous month), while ocean freight
transportation costs fell 6.9% (vs. -4.1% the previous month).

Transportation costs are likely to rise, reflecting higher
international resource prices, but upward pressure on service prices
from domestic demand remains weak, thus resulting in only a modest
recovery in service prices.

The index for advertising services (weighting: 6.85%), which
includes TV commercials, rose 0.9% on the year, following a 1.2% drop in
December.

The index for information and communications, including software
development and mobile phone charges (weighting: 21.65%), dropped 0.9%
on the year after falling 1.1% in the previous month.

The index for finance and insurance (weighting: 5.91%) fell 0.5% on
year after declining 0.9% 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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