— Japan June Total CSPI Posts 21th Straight Y/Y Drop
— Japan June Core CSPI (Ex Intl Transport) -1.2% Y/Y; May Rev -1.2%
— Japan June Total CSPI +0.1% M/M Vs May -0.1%
— Japan June Core CSPI +0.2% M/M Vs May Revised Flat

TOKYO (MNI) – Japan’s corporate service price index fell 1.0% in
June from a year earlier, the 21th consecutive year-on-year drop, with
the pace of decline accelerating slightly from the 0.8% decline posted
in May, Bank of Japan data released Tuesday showed.

June’s decline was slightly smaller than the consensus call of
-1.1%.

The larger y/y decline in June was due mainly to drops in
transportation costs, down by 0.2% y/y, following a 1.0% rise in May, a
BOJ official told reporters.

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

The total CSPI, which stood at 97.5 in June against 100 in the 2005
base year, was up 0.1% from the previous month after falling an
unrevised 0.1% in May. It was the first m/m rise in three months.

Core CSPI excluding international transportation, a fairly new
measure free of volatile factors, dropped 1.2% year-on-year in June
after falling by a revised 1.2% in May (preliminary -1.3%).

Month-on-month, the core CSPI was up 0.2% in June after remaining
unchanged in May (revised from a preliminary -0.1%). It was the first
m/m rise in three months.

International shipping charges can fluctuate sharply due to changes
in demand from China and other emerging countries as well as due to yen
moves against the dollar.

In June, the larger y/y drop in total CSPI compared with May was
due mainly to the downward contribution from transportation, information
and communications and real estate services.

Meanwhile, positive contributions to the index came from
advertising services, leasing and rental as well as finance and
insurance.

The index for transportation, which accounts for about 21% of the
index weighting, was down 0.2% year-on-year in June after rising a
revised 1.0% in May.

Within this category, ship chartering fees fell 8.7% year-on-year
(vs. -5.2% in the previous month), while ocean freight transportation
costs rose 4.1% (vs. a revised +15.6% the previous month).

The index for advertising services (weighting: 6.85%), which
includes TV commercials, rose 0.1% on the year, reversing from a revised
0.7% fall in May.

The index for information and communications, including software
development and mobile phone charges (weighting: 21.65%) fell 0.9% on
the year, compared with -0.8% in the previous month.

The index for finance and insurance (weighting: 5.91%) dropped 0.7%
on the year after falling a revised 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.

Lat year, 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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