Bank of Japan: May Corporate Services Price Index up 1.4%

June 27, 2007
By Ken Worsley

The Bank of Japan’s Corporate Services Price Index rose 1.4 percent in May, according to figures published yesterday. This is the tenth consecutive increase in the index, and last month’s pace of growth was the highest seen since July 1992 (when the consumption-tax fueled rise of 1997 is factored out).

Amongst the category headers, transportation prices led the way, up by 6.0 percent. Following that:

Other services were up 1.0 percent.
Information services were up 0.9 percent.
Communication and broadcasting prices were unchanged.
Leasing and rental was down 1.0 percent.
Advertising services were down 2.0 percent.
Finance and insurance fell 0.6 percent.
Real estate services fell 0.8 percent.

It should be noted that the rise in transportation prices, which drove the overall increase, was attributed to exports of coal and iron ore to China. In other words, Chinese demand certainly plays a role in these figures.

Could that be a mitigating factor that prevents this from being a sign pointing to an August rate hike? Does it matter? The Nikkei’s most recent poll of 33 private sector economists finds 14 expecting a rate hike in August. That’s 42 percent. One even predicted a July rate hike (Ballsy! With the Upper House election and all? This might be someone who’s really in the know.) All of those who answered the poll expect to see an increase in the interest rates before New Year’s time.

Given that two didn’t answer the Nikkei, that puts 45% predicting the August rate hike. Count me in.

Filed Under Bank of Japan, Corporate Price Index, Economic Reports, Inflation

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