— Japan Feb CGPI Posts 5th Straight Y/Y Rise
— Japan Feb CGPI +0.2% M/M Vs Jan Unrevised +0.5%
— Japan Feb CGPI Posts 5th Straight M/M Rise

TOKYO (MNI) – Japan’s corporate goods price index rose 1.7% from a
year earlier in February, marking the fifth consecutive y/y rise and the
largest gain in more than two years, due to rising international
commodity prices backed by strong Asian demand, data released by the
Bank of Japan Thursday showed.

The February rise accelerated from an unrevised 1.6% gain in
January, and was lower than the median forecast in a Market News
International survey, which called for +1.8%.

The February y/y rise was the largest since November 2008, when the
index was up 2.4%, a BOJ official told reporters.

“The trend of CGPI is the same as last month. CGPI continued to be
pushed up by high overseas prices on the back of strong demand in Asia
as well as bad weather conditions,” a BOJ official said.

Economists expect the year-on-year gain in CGPI to accelerate in
coming months due to the recent rise in crude oil prices.

The average price of regular gasoline in Japan this week soared
further to Y145.5 ($1.76) per liter, or $6.69 per gallon, from Y139.0
last week, hitting the highest level since October 2008, data released
by the Oil Information Center showed on Wednesday.

Regular gasoline prices reached the highest level in over two years
since the week that started on Oct. 27, 2008, when the average price
stood at Y151.3.

Gasoline prices posted a third straight weekly increase after
snapping a 10th consecutive week of price gains in the week that started
on Feb. 14.

The BOJ official also said that Japan’s terms of trade appear to be
worsening and so the BOJ needs to pay attention to corporate profits.
He did not elaborate.

On a year-on-year basis, the February CGPI rise was led by higher
prices for petroleum and coal products, iron and steel, nonferrous
metals and processed foodstuffs.

The CGPI has been recovering 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 2010, the CGPI rose 0.5%, marking the first y/y gain since
December 2008. It was followed by a 0.4% rise in June and 0.1% drop in
July.

In today’s data, prices of processed foodstuffs were up 3.2% from a
year earlier after rising 3.4% in January. This pushed up the CGPI by
0.38 percentage point.

Petroleum and coal products were up 11.5% in February from a year
earlier after rising an unrevised 11.3% in January, pushing up the CGPI
by 0.70 percentage point.

Prices of iron and steel rose 11.8% on year in February,
accelerating from a 11.6% rise in January and pushing up the CGPI by
0.67 percentage point.

Scrap and waste prices surged 23.3% on year in February, slowing
from a revised 29.9% in January. This boosted the CGPI by 0.15
percentage point.

Prices of nonferrous metals rose 12.2% on year in February,
accelerating from a 7.8% rise in January. This raised the CGPI by 0.33
percentage point.

From the previous month, the CGPI rose 0.2% in February, posting
the fifth consecutive m/m rise after rising an unrevised 0.5% in
January.

The January month-on-month gain was the largest since July 2009,
when the index was also up 0.5%.

Month on month, positive contributions in February came from
agriculture, forestry and fishery products (+0.06 percentage point),
nonferrous metals (+0.05 pt), petroleum and coal products (+0.05 pt),
chemicals and related products (+0.04 pt) and scrap and waste (+0.03
pt).

Meanwhile, negative contribution were information and
communications equipment (-0.03 pt) and electric power, gas and water
(-0.02 pt).

The number of items whose prices rose from a year earlier totaled
328 in February (vs. 323 in January), or 38.4% of the basket (37.8% in
January), while the number of items whose prices fell came to 369, or
43.2%, compared with 376, or 44.0%, in January, the BOJ official said.

The BOJ said in its latest economic report released in February,
“The three-month rate of change in domestic corporate goods prices
(adjusted to exclude the effects of seasonal changes in electricity
rates, 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.”

The latest median forecast for CGPI by the nine-member BOJ policy
board is +0.5% y/y for this fiscal year and +1.0% for fiscal 2011.

CGPI recorded y/y falls from January 2009 to April 2010 in the
aftermath of the global financial crisis and recession. It hit a record
drop of -8.5% in August 2009.

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 have widened to -3.8% in the October-December quarter
from -1.0% in July-September.

The BOJ’s overseas commodity index rose 42.8% y/y to 208.6 in
February (against 100.0 for the 2005 base year), which was the highest
level since 217.6 in July 2008.

The index — which comprises 17 commodities including crude oil,
copper, gold, wheat and beef — stood at 236.7 in June 2008, the highest
level in over 18 years.

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

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