RTTNews - Japan's corporate goods prices dropped by the steepest year-over-year pace on record in June, mainly due to a dip in petroleum and coal prices and the prices of scrap and waste products, a report by the Bank of Japan showed Friday.

The corporate goods price index dipped 6.6% year-on-year in June, after falling a revised 5.5% in the previous month, revised from a 5.4% drop. Economists expected prices to fall 6.4%. This was the also the sixth consecutive month that producer prices fell.

In June, petroleum and coal product prices dipped 41.7%, while that of scrap and waste products fell 60.6%. Double digit declines were also seen for chemicals and related products as also for non ferrous metals.

Month-on-month, the corporate goods prices were down 0.3% in June, slower than a revised 0.5% decline in the preceding month, but faster than economists' estimates of a 0.1% drop. The producer prices on a monthly basis have been declining continuously since September last year.

Iron and steel products contributed to a 0.16 percentage points decline in the prices month-on-month, the largest negative contribution among the commodity groups. Iron and steel prices were down 2.5%. Utility prices fell 3.1% and subtracted 0.15 percentage points from the index. Moreover, processed foodstuffs, electrical machinery and equipment made negative contributions. However, petroleum and coal products, scrap and waste as also non ferrous metals made positive contributions.

Consumer prices are also seeing a deflationary trend. Reflecting the weakness in the economy, consumer prices in the economy dropped 1.1% annually in May, sharper than a 0.1% drop in the preceding month, the Ministry of Internal Affairs and Communications said last month. At the same time, the core consumer prices, excluding food, dropped at a record pace of 1.1% in May.

Moreover, the Ministry said the jobless rate in the economy was 5.2% in May, which is the highest level since September 2003, following the 5% rate in April.

However, there were signs that the worst was over for the Japanese economy as the Bank of Japan upgraded its regional economic assessment for the first time in three years. The central bank said economic conditions in the economy continued to remain severe, but the pace of deterioration had slowed.

The bank said developments in inventory adjustments helped increase exports and production, although they remained at a low level. Further, the central bank said the financial system had become calmer, reflecting an improvement in the commercial paper and corporate bond markets.

Meanwhile, a report from the Cabinet Office also showed signs of improvement in the economy. The leading index, measuring signs of future economic activity climbed to 77 in May from 76.2 in April. The coincident index increased to 86.9 from 86 in the preceding month.

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