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— Japan May CGPI Posts 1st M/M Fall In 8 Months

TOKYO (MNI) – Japan’s corporate goods price index rose 2.2% from a
year earlier in May, the eighth consecutive y/y rise, but decelerating
from +2.5% in April on slower year-on-year gains in commodity prices,
data released by the Bank of Japan on Friday showed.

The May CGPI increase came in lower than the median forecast for a
2.5% rise in a Market News International survey of economists.

April’s +2.5% rise was the largest y/y gain since October 2008,
when the index was up 4.5%.

“Prices, which had been pushed up in the aftermath of the (March
11 earthquake) disaster, have fallen on the recent recovery in supply
chains,” a BOJ official told reporters.

He added that the BOJ will closely watch how annual revisions to
the data and commodity market fluctuations will affect CGPI in the
coming months.

The annual benchmark revision to the corporate goods price data,
which is usually implemented every April, has been delayed due to the
disaster, the BOJ official said.

The CGPI has recovered steadily from the record 8.5% drop marked in
August and July 2009, which were the largest year-on-year declines since
the BOJ began compiling the data in 1960.

In May, the CGPI rise on a year-on-year basis was led by high
prices for petroleum and coal products, chemical and related products,
nonferrous metals and processed foodstuffs.

Prices of processed foodstuffs were up 3.8% from a year earlier
after rising 3.6% in April. This pushed up the CGPI by 0.44 percentage
point.

Petroleum and coal products were up 14.9% in May from a year
earlier after rising 18.6% in April, pushing up the CGPI by 0.98
percentage points.

Prices of iron and steel rose 5.7% on year in May after a 8.3% rise
in April and pushed up the CGPI by 0.34 percentage point.

Prices of nonferrous metals rose 7.6% on year in May, decelerating
from a 7.0% rise in April. This raised the CGPI by 0.21 percentage
point.

From the previous month, the CGPI fell 0.1% in May, marking the
first m/m fall in eight months, after rising 0.9% in April.

The BOJ official noted that the drop in international commodity
prices contributed to the month-on-month drop in May.

Month-on-month negative contributions in May came from nonferrous
metals (-0.10 percentage point), agriculture, forestry and fishery
products (-0.03 pt), scrap and waste (-0.03 pt), information and
communications equipment (-0.03 pt), electrical machinery and equipment
(-0.03 pt) and petroleum and coal products (-0.03 pt).

Meanwhile, month-on-month positive contributions in May came from
electric power, gas and water (+0.05 pt), chemical and related products
(+0.03 pt) and plastic products (+0.03 pt).

The number of items whose prices rose from a year earlier totaled
372 in May (vs. 384 in April), or 43.5% of the basket (vs 44.9% in
April), while the number of items whose prices fell came to 309, or
36.1%, compared with 298, or 34.9%, in April, the BOJ official said.

It was the second consecutive month that the share of rising prices
had exceeded that of falling prices.

The BOJ’s latest economic report released on May 20 said: “The
three-month rate of change in domestic corporate goods prices is rising,
mainly due to the increase in international commodity prices.”

As for the outlook for CGPI, the BOJ said: “Domestic corporate
goods prices are expected to continue rising for the time being,
reflecting movements in international commodity prices.”

CGPI generally lags about six months after changes in the country’s
output gap (excess capacity vs. demand), which is estimated by the
Cabinet Office to be -3.9% in the January-March quarter, unchanged from
the previous quarter.

The BOJ’s overseas commodity index — composed of 17 items
including crude oil, copper, gold, wheat and beef — stood at 206.7
(against 100.0 for the 2005 base year) in May, staying above 200.0 for
the fourth month in a row.

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

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