— Japan CGPI Posts 15th Straight Y/Y Drop In Mar
— Japan Mar CGPI +0.2% M/M Vs Feb +0.1%
— Japan CGPI Posts 4th Straight M/M Rise
— Japan CGPI Falls Record -5.2% In FY09, Matching FY1986 Drop

TOKYO (MNI) – Japan’s corporate goods price index fell 1.3% from a
year earlier in March, marking the 15th consecutive y/y drop, but the
rate of decline continued to slow from a revised -1.6% (initially -1.5%)
in February, data released by the Bank of Japan on Tuesday showed.

The drop in the headline index was weaker than the consensus call
of a 1.1% fall.

The index has been recovering steadily from the record 8.5% drop
marked in August and July 2009, which was the largest year-on-year drop
since the BOJ began compiling the data in 1960.

The CGPI fell by a record 5.2% in fiscal 2009 that ended on March
31, reversing from a 3.1% rise in fiscal 2008 and a 2.3% gain in fiscal
2007. It matched the 5.2% y/y drop posted in fiscal 1986.

Prices of scrap and waste surged 81.1% in March from a year
earlier, up sharply from a 42.8% rise in February.

This sector pushed up the headline CGPI by 0.31 percentage point in
March, a BOJ official told reporters.

The official said that material prices continue rising on the
global economic recovery driven by growth in China and India.

He added the year-on-year decline in the CGPI is likely to moderate
in the coming months.

Prices of petroleum and coal products in the domestic market rose
27.3% from a year earlier in March, up from a revised 26.2% rise in
February.

This sector pushed up the headline CGPI by 1.29 percentage points
in March, the official said.

Prices of non-ferrous metals rose 19.9% on year in March (vs.
unrevised +20.6% in February) and those of chemicals and related
products gained 3.0% y/y (vs. revised +2.6% in February).

Non-ferrous metals pushed up the headline CGPI by 0.45 percentage
point in March.

Meanwhile, electric power, gas and water fell 17.2% from a year
earlier in March (vs. unrevised -17.8% in February).

Prices of scrap and waste as well as petroleum and coal products
were supported by strong demand from emerging economies, mainly China,
said the BOJ official.

The official also said that the higher costs are gradually
filtering through to final goods prices, which the BOJ is monitoring
closely.

Meanwhile, iron and steel prices fell 13.8% y/y in March (vs.
revised -16.1% in February).

On a month-over-month basis, the CGPI was up 0.2% from the previous
month in March, compared with +0.1% in February, showing the fourth
consecutive m/m rise as the December figure was revised up to +0.1%.

The number of items whose prices fell from a year earlier totaled
459 (vs. 469 in February), or 53.7% of the basket (54.9% in February),
while the number of items whose prices rose came to 201, or 23.5%, up
from 198, or 23.2%, in February, the BOJ official said.

Compared with the month before, the domestic CGPI was pushed up by
higher prices for scrap and waste, iron and steel, petroleum and coal
products, nonferrous metals as well as electric power, gas and water.

Those gains offset drops in prices for transportation equipment,
other manufacturing industry products and agriculture, forestry and
fishery products.

In its semi-annual Outlook Report released on Oct. 30, 2009, the
BOJ said, “the CGPI is expected to continue declining on a year-on-year
basis in the second half of fiscal 2009 due to the deterioration in the
aggregate supply and demand balance. But the pace of decline will likely
slow down reflecting developments in commodity prices.”

It also said, “The rate of decline in the CGPI is likely to
gradually moderate from fiscal 2010 onward as the slack in the economy
dissipates.”

CGPI generally lags about six months from the country’s output gap,
which was estimated by the Cabinet Office to be around 6.4% (about Y30
trillion) in the fourth quarter of 2009.

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

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