— Japan May Total CSPI Posts 31st Straight Y/Y Drop; Apr -0.7%
— Japan May Core CSPI (Ex Intl Transport) -0.8% Y/Y; Apr -0.7%
— Japan May Total CSPI -0.3% M/M Vs Apr Revised -0.2%
— Japan May Core CSPI -0.2% M/M Vs Apr -0.4%

TOKYO (MNI) – Japan’s corporate service price index fell 0.9% in
May from a year earlier, the 31st consecutive year-on-year drop, with
the pace of decline accelerating from a revised 0.7% fall (preliminary
-0.8%) in April, Bank of Japan data released on Friday showed.

The 0.9% fall is the largest year-on-year drop since -1.1% marked
in January, February and March.

The larger year-on-year drop in May was mainly due to falls in sea
and air international transportation fees, leasing and rental costs and
charges for “other services” including civil engineering and hotels.

The impact of higher ship chartering fees has eased while the
appreciation of the yen lowered international charges, a BOJ official
said.

The larger y/y drops in international and domestic passenger air
transportation costs might have been caused by the March 11 disaster
that kept overseas visitors away from Japan amid fears of spreading
nuclear radiation leaks, he said.

The CSPI, which stood at 96.2 in May against 100 in the 2005 base
year, was down 0.3% from the previous month, posting the second
consecutive m/m fall after a revised -0.2% in April.

The larger y/y drop in May compared with the drop in April was
caused by negative contributions from transportation (-0.16 point),
leasing and rental (-0.10 point) and other services including civil
engineering design services (-0.02 point).

They outpaced positive contributions from information and
communications (+0.02 point).

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 0.8% year-on-year in May, after falling 0.7% in April.

From the previous month, the core CSPI fell 0.2% in May, posting
the second consecutive month-on-month drop, after falling 0.4% in April.

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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