— Japan July Total CSPI Posts 22nd Straight Y/Y Drop
— Japan July Core CSPI (Ex Intl Transport) -1.2% Y/Y; Jun Rev -1.3%
— Japan July Total CSPI -0.4% M/M Vs June +0.1%
— Japan July Core CSPI -0.1% M/M Vs June Revised +0.1%

TOKYO (MNI) – Japan’s corporate service price index fell 1.2% in
July from a year earlier, the 22nd consecutive year-on-year drop, with
the pace of decline accelerating from the 1.0% decline posted in June,
Bank of Japan data released Wednesday showed.

The larger y/y decline in July was due mainly to drops in costs for
newspaper advertisements and television commercials, office leasing,
auto insurance premiums, architectural design services and ocean freight
transportation, all of which showed wider y/y falls than in June.

The downward pressure on prices has eased generally since the CSPI
hit a record drop of -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 97.1 in July against 100 in the 2005
base year, was down 0.4% from the previous month after rising 0.1% in
June. It was the fourth m/m drop within the first seven months of the
year.

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

Month-on-month, the core CSPI was down 0.1% in July after rising
0.1% in June (revised from a preliminary +0.2%). It was the first m/m
drop 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 July, the larger y/y drop in total CSPI compared with June was
due mainly to the downward contribution from advertising services, real
estate services, finance and insurance, “other services” (civil
engineering, etc.) as well as transportation.

Meanwhile, positive contributions to the index came from leasing
and rental as well as information and communication.

The index for transportation, which accounts for about 21% of the
index weighting, was down 0.3% year-on-year in July after falling a
revised 0.3% in June.

Within this category, ship chartering fees fell 8.8% year-on-year
(vs. -8.7% in the previous month), while ocean freight transportation
costs dipped 1.8% (vs. unrevised +4.1% the previous month).

The index for advertising services (weighting: 6.85%), which
includes TV commercials, fell 1.3% on the year, following a revised 0.2%
rise in June.

The index for information and communications, including software
development and mobile phone charges (weighting: 21.65%) dropped 1.0% on
the year, compared with a revised -1.0% in the previous month.

The index for finance and insurance (weighting: 5.91%) slipped 1.0%
on the year after falling a revised 0.8% 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.

Last 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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