RTTNews - Japan's corporate service prices declined at a record pace in June, mainly due to a fall in transportation service prices, the Bank of Japan said Monday.

The corporate services price index declined 3.2% year-on-year in June, quicker than the 3% fall in the previous month, but slower than economists' expectation of a 3.3% drop. This was the ninth straight month of decline, with the latest fall being the steepest since the series began in 1985.

Transportation showed the steepest drop in prices on an annual basis, falling 11.2% in June compared to a revised 10.8% fall in the preceding month and deducting 0.10% from the overall index. This was followed by a 5.7% drop in prices in advertising services.

On a monthly basis, the index climbed 0.4% in June, reversing the declines of the past two months. In May, the index was down 0.3%.

The corporate goods price index or the producer price index also showed the steepest drop on record in June, falling 6.6% year-on-year compared to the 5.5% fall in May, mainly due to a dip in petroleum and coal prices and the price of scrap.

Compared to the previous month, the corporate goods prices were down 0.3% in June, slower than a revised 0.5% decline in the preceding month.

In its white paper on the economy and government for the fiscal year 2009 released last week, Japan's cabinet office said the second-largest economy was still facing downside risks in the form of deflation, unemployment and slowdown in the overseas economies. However, there were some signs of recovery, helped by the stimulus measures.

But for a full-fledged recovery to take place, growth in exports and personal income were important, the government said. At the same time, a fall in industrial output would prompt companies to fire more workers, it noted.

In June, the country's exports dipped 35.7% year-on-year, slower than a 40.9% fall in the preceding month. Imports also dropped at a slower pace of 41.9% compared to a 42.4% fall in the preceding month. Due to these improvements, the country recorded a trade surplus of JPY 508 billion, higher than the JPY 104.1 billion surplus in the previous year.

However, production in the internal economy remained weak. An index measuring activity levels in Japan dropped 9.9% year-on-year in May, faster than the 9.8% fall in the preceding month, an official report showed on June 24. However, on a monthly basis, the activity index rose 0.7%, slower than a 2.6% growth in the preceding month.

Corporate bankruptcies in the country have been rising in recent months, adding to strain on employment. In June, corporate bankruptcies were up 21.5% year-on-year versus the 6.3% rise in May, a report from the Teikoku Databank Ltd said. Month-on-month, the corporate bankruptcies grew 22.4% in June, compared with a 9.6% drop in May.

The latest official figures for unemployment showed that the jobless rate hit a near six-year high of 5.2% in June, after standing at 5% in in April.

In the meantime, the government expects the economy to grow in the second quarter, if the increase in demand is supported by exports and output. Further, the government urged the central bank to do all it can to bring the economy back to sustainable growth.

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