Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Fukushima
NAKAGAWA Junko
Member of the Policy Board
I. Current Situation of Economic Activity and Prices
A. Economic Developments Abroad
I would like to begin my speech by talking about the current situation of overseas economies.
The pace of recovery in overseas economies has slowed as the effects of rapid policy interest
rate hikes that have been carried out by central banks since 2022 have gradually started to
weigh on the real economy. In its January 2023 World Economic Outlook (WEO) Update, the
International Monetary Fund (IMF) projected that the global economic growth rate would
slow from an estimated 3.4 percent in 2022 to 2.9 percent in 2023. An indicator measuring
business sentiment has stayed below 50, the break-even point between improvement and
deterioration (Chart 1).
Let me take a look at developments in overseas economies by major region. In the United
States, private consumption and the employment situation have been firm. However, a
marked impact of policy interest rate hikes has been seen in housing investment, as evidenced
by, for example, a decline in the number of housing starts. Production has remained more or
less flat. In Europe, as the resumption of economic activity from the COVID-19 pandemic
has run its course, signs of slowdowns are becoming clearer due to strong inflationary
pressure stemming from the continued effects of the situation in Ukraine. In China, although
private consumption and production have been weak, due in part to the surge in the number
of COVID-19 cases at the end of 2022, there have been moves toward normalization of
economic activity recently. Albeit with variation across countries and regions, as outlined
earlier, signs of slowdowns in overseas economies are becoming clearer on the whole.
B. Economic Developments in Japan
Turning to the current situation of Japan's economy, the overall picture shows that it has
picked up, particularly in terms of business fixed investment and private consumption, as the
resumption of economic activity has progressed while public health has been protected from
COVID-19. I would like to describe Japan's economic situation from two aspects: the
corporate sector and the household sector.
1. Corporate sector
Let me start with the corporate sector.
Corporate profits have been at high levels on the whole, mainly reflecting the easing of
supply-side constraints, although current profits for the July-September quarter of 2022
declined slightly from the previous quarter (Chart 2). Business sentiment is more or less
unchanged on the whole. The Bank of Japan's December 2022 Tankan (Short-Term Economic
Survey of Enterprises in Japan) showed that sentiment for nonmanufacturing has improved,
mainly for private consumption-related industries such as eating and drinking services,
accommodations, and retail. However, sentiment for manufacturing has been more or less flat
due to the effects of high raw material costs and production adjustments for IT-related goods.
With corporate profits being at high levels, business fixed investment has continued to
increase moderately. There is a view that this increase has been driven mainly by digital- and
labor saving-related investments, investment intended for construction of logistics facilities
on the back of an expansion in e-commerce, and investment related to urban redevelopment
projects.
Production and exports have also continued on their uptrend, albeit with fluctuations, with
the waning of supply-side constraints (Chart 3). Looking at industrial production by industry,
that of transport equipment has returned to a moderate uptrend, as the effects of the global
semiconductor shortage have gradually eased. Production of "electrical machinery, and
information and communication electronics equipment" has increased for on-board
equipment for motor vehicles, as has production of items used for personal computers and
peripheral devices, partly due to renewal demand associated with the end of support for some
operating systems. On the other hand, electronic parts and devices have been under stronger
inventory adjustment pressure, particularly on memory for smartphones and personal
computers. With respect to exports, those to advanced economies have increased as a trend,
mainly for automobile-related and capital goods. As for exports to emerging economies, on
the other hand, those to China as well as the NIEs and the ASEAN economies have been
somewhat weak for intermediate and IT-related goods.
2. Household sector
Next, I would like to explain developments in the household sector from the aspects of private
consumption and the employment and income situation.
Private consumption has increased moderately, as the resumption of consumption activities
has progressed while public health has been protected (Chart 4). Breaking down household
consumption by services and goods, services consumption as a whole has increased with a
pick-up in travel and dining-out. Specifically, although overseas travel has remained at a low
level, domestic travel has increased not only for short but also long distances, partly due to
the positive contribution of the government's domestic travel discount program. Dining-out
has shown signs of a pick-up from the plunge seen during the pandemic, albeit mainly in
terms of small groups (Chart 5). As for goods consumption, that of durable goods has seen
the following developments: while sales of new cars have increased on the back of a pick-up
in production reflecting the waning of supply-side constraints, sales of household electrical
appliances have declined for seasonal items in particular, presumably due in part to relatively
higher temperatures in November than in normal years. When fluctuations are smoothed out,
consumption of nondurable goods has increased, mainly for clothes, although the effects of
high inflation have been seen for food.
The employment and income situation has improved moderately on the whole. Labor market
conditions have been considerably tight, with various related indicators being at levels close
to those observed prior to the pandemic and during the bubble economy of the late 1980s
(Chart 6). Under these circumstances, the number of regular employees has increased
moderately, mainly in the medical, healthcare, and welfare services industry as well as the
information and communications industry, both of which have faced a severe labor shortage;
the number of non-regular employees has also risen moderately, mainly in the medical,
healthcare, and welfare services industry as well as the face-to-face services industry (Chart
7). Total employee income has continued to increase in nominal terms due to moderate rises
in both the number of employees and total cash earnings per employee.
C. Price Developments in Japan
Next, I would like to talk about price developments in Japan.
Let me first touch on the price trend of goods and services traded within the domestic
corporate sector. Reflecting the earlier raw material cost increases, the year-on-year rate of
change in the producer price index (PPI), which covers goods prices, has remained high,
marking 9.5 percent for January 2023 (Chart 8). That in the services producer price index
(SPPI), which covers the price of services within the corporate sector, has also continued to
see a moderate rise, although the rise has not been as steep as that of the PPI. Looking at the
price indexes that divide demand into four stages of intermediate demand from the upstream
to downstream stages of supply chains, the earlier raw material cost increases have continued
to be passed on to selling prices at the midstream to downstream stages.
In this situation, the consumer price index (CPI) has continued to reflect a pass-through to
selling prices of raw material cost increases. Looking at the most recent data available, the
year-on-year rate of change in the CPI for all items excluding fresh food was 4.2 percent for
January, in reflection of rises in the price of such items as energy, food, and durable goods
(Chart 9). The pass-through of cost increases to prices has been observed for a wide range of
goods and services: food, daily necessities, and durable goods for the former, and dining-out
for the latter. This holds true even when excluding the effects of (1) items with significant
price fluctuations, such as energy, and (2) temporary factors, including the domestic travel
discount program.
In what follows, I would like to explain in detail the background to the recent price rises from
the viewpoints of a change in firms' price-setting stance and the underlying trend in prices.
1. Firms' price-setting stance
Let me start with firms' price-setting stance. Firms have been increasingly passing on cost
increases to selling prices.
According to an analysis based on the results of the Bank's Tankan surveys, firms that had
not changed prices in the past have begun to change course toward raising prices. The
diffusion index (DI) for output prices suggests that a significant number of these firms
responded that output prices have changed to a "rise" for the first time in more than three
decades (Chart 10).
What lies behind the change in their price-setting stance is the significant rise in raw material
costs. Previously, amid the relatively small rise in such costs, many firms did not change
prices for fear of losing their customers and barely withstood the increased costs by improving
efficiency and reducing expenses. However, even they have been obliged to decide on raising
their prices, as a broad range of firms -- including competitors -- have opted for price hikes
in reflection of the considerable increase in raw material costs since 2022.
2. Underlying trend in prices
Next, I will explain the underlying trend in the CPI based on various indicators released by
the Bank.
First, it can be pointed out that, as firms' price-setting stance has changed, prices have
increased for a broad range of items. Of all items covered by the CPI, those for which the
price has increased accounted for over 80 percent, whereas those for which the price has
declined accounted for around 10 percent, both on a year-on-year basis as of January 2023
(Chart 11). Even compared with around 2008, when the CPI rose triggered by higher import
prices of crude oil and other items, price hikes have spread across a wider range of items.
Let us also look at other indicators that take into consideration the price change distribution.
In terms of both the trimmed mean -- calculated by excluding items that belong to the upper
and lower 10 percent of the price change distribution -- and the mode -- which is the inflation
rate with the highest density in the distribution -- the year-on-year rates of change in the CPI
have increased to around 3 percent and around 1.5 percent, respectively (Chart 11). However,
those increases have fallen short of a 4.3 percent rise in the headline CPI. One thing that is
clear from those indicators is that, even though the pass-through of cost increases has been
spreading to a wider range of items, the overall CPI has been significantly pushed up by a
small group of items such as energy. As will be touched on again later when I explain the
outlook for prices, the contribution made by items that have led CPI inflation is likely to
become markedly smaller as the rise in import prices subsides. Consequently, the overall CPI
inflation rate is expected to decelerate. While using the indicators that I just explained, the
Bank will continue to examine the underlying trend in prices.
II. Outlook for and Risks to Economic Activity and Prices
A. Outlook
Next, I would like to turn to the outlook for Japan's economic activity and prices.
Japan's economy is likely to continue recovering with the impact of COVID-19 and supply-
side constraints waning, although it is expected to be affected by slowdowns in overseas
economies and high commodity prices. From a medium- to long-term perspective, the
economy is projected to continue growing at a pace above its potential as a virtuous cycle
from income to spending intensifies gradually.
As presented in the Outlook for Economic Activity and Prices (Outlook Report) decided by
the Bank at the January 2023 Monetary Policy Meeting (MPM), the medians of the Policy
Board members' forecasts for real GDP growth rates are 1.7 percent for FY2023 and 1.1
percent for FY2024 (Chart 12).
The rate of increase in consumer prices is expected to decelerate noticeably for the time being,
given that (1) the contribution from higher import prices, which have been pushing up overall
inflation thus far, is likely to dissipate, due in part to a decline in commodity prices, and (2)
the government's economic measures to contain inflation will take effect. Under these
circumstances, the medians of the Policy Board members' forecasts for the year-on-year rate
of change in the CPI for all items excluding food are 1.6 percent for FY2023 and 1.8 percent
for FY2024, down from the forecast of 3.0 percent for FY2022 (Chart 12).
B. Risks
The outlook for economic activity and prices that I just mentioned entails a range of
uncertainties. In what follows, I will describe the risks that I am paying particular attention
to.
First is developments in overseas economic activity and prices, and in global financial and
capital markets. Central banks have made rapid policy interest rate hikes since 2022 in order
to combat strong inflationary pressure. Owing in part to the effects of these rate hikes, global
inflationary pressure has started to show signs of easing. The Bank's baseline scenario
assumes that the pace of monetary tightening will become moderate and its effects on
economic activity will be only relatively modest. However, given that the rate of increase in
services prices has remained high in some advanced economies, there is a risk of continued
uncertainty regarding how much monetary tightening will be needed before inflation abates.
If stronger-than-expected monetary tightening will be required, this will accordingly exert a
severe negative impact on economic activity. In that case, there is a possibility that sharp price
fluctuations in financial markets and capital outflows from emerging economies will amplify
the negative impact, and that this will lead to overseas economies deviating downward from
the Bank's baseline scenario.
Second is geopolitical risks and developments in the price of commodities, including grain.
More than a year has passed since the onset of Russia's invasion of Ukraine, and the situation
is becoming more prolonged. It is difficult to predict at this point how it will evolve; however,
depending on the course of this situation, overseas economies, particularly Europe, could be
pushed down further. Furthermore, the price of grain and other commodities, which has been
more stable than previously, may be adversely affected.
The third point that I am particularly attentive to is firms' and households' medium- to long-
term growth expectations. Recently, firms have been actively making investment with a view
to the post-COVID-19 era, digitalization, and decarbonization, and these initiatives are
expected to enhance their growth potential in the long term. On the other hand, some firms
have revised their strategies regarding supply chains. This is based on heightened concern
over geopolitical risks, mainly reflecting the situation in Ukraine and the U.S.-China trade
friction, and the experience of supply-side constraints caused by the pandemic. In doing so,
they have reviewed so-called friend-shoring supply chains -- an approach of establishing trade
networks mainly with allies and friendly nations. Since these actions are taken to prioritize
stability even at the cost of sacrificing efficiency to some extent, they could induce upward
pressure on prices. In the event of a change in the trend of globalization, which has supported
the growth of the global economy to date, future developments in economic activity and
prices may be affected through changes in firms' and households' medium- to long-term
growth expectations.
Lastly, I would like to point out firms' price- and wage-setting behavior as a risk that may
significantly affect overall inflation. As I mentioned earlier, firms that had not changed their
selling prices before have decided to raise them in the face of steep increases in raw material
costs. If firms' inflation expectations become higher, the pass-through of cost increases could
accelerate further. Wages are expected to rise in line with improvement in economic
conditions. However, uncertainty is high as to what extent wages will rise. If the behavior and
mindset based on the assumption that wages will not increase easily remain deeply entrenched,
there is a risk that moves to increase wages will not strengthen as much as expected and prices
will in turn be under downward pressure. At present, large firms in particular hold a stance of
increasing wages at a rate exceeding the inflation rate. I am paying close attention to the
extent to which small and medium-sized firms will follow suit.
III. The Bank's Monetary Policy
Next, I would like to talk about the Bank's monetary policy conduct.
Since April 2013, the Bank has continued large-scale monetary easing with an unwavering
commitment to achieving the price stability target of 2 percent at the earliest possible time.
However, as it turned out, it has been taking time to achieve the target. In pursuing monetary
easing over a long period, the Bank has been taking into consideration its side effects. An
example of such side effects is the squeeze on financial institutions' profits under the low
interest rate environment, which in turn may adversely affect the functioning of financial
intermediation. Having said that, the Bank judges that, currently in Japan, financial
institutions have sufficient capital bases and the financial intermediation function is being
fulfilled smoothly. In addition, as the liquidity and functioning of bond markets have been
deteriorating, the Bank, while taking measures to contain this side effect, has continued with
its monetary easing.
Specifically, in March 2021, the Bank conducted an assessment of the measures taken until
then in order to continue with monetary easing in a sustainable manner. The Bank had
previously been conducting yield curve control in a way that kept 10-year Japanese
government bond (JGB) yields at around 0 percent; following the assessment, however, it
made clear that the range of 10-year JGB yield fluctuations would be between around plus
and minus 0.25 percentage points from the target level. The Bank also decided to purchase
exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) flexibly in a
prioritized manner, as the findings of the assessment suggested that large-scale purchases of
these instruments were effective during times of heightened market instability.
Subsequently, at the December 2022 MPM, the Bank decided that, while significantly
increasing the amount of JGB purchases, it would expand the range of 10-year JGB yield
fluctuations from the target level from between around plus and minus 0.25 percentage points
to between around plus and minus 0.5 percentage points. The Bank also decided that it would
make nimble responses by increasing the amount of JGB purchases even more and
conducting fixed-rate purchase operations (Chart 13).
These decisions were made in order to facilitate the transmission of monetary easing effects
generated under the framework of yield curve control -- such as through corporate financing
-- by encouraging a smoother formation of the entire yield curve. While 10-year JGB yields
had been hovering in the range of around plus and minus 0.25 percentage points from the
target level, a distortion has occurred in the relative relationships between the interest rates
of JGBs with 10-year maturity and those with other maturities. A large price gap has also
been observed between spot and futures markets. Such market distortions have resulted in,
for example, difficulty in the pricing of corporate bonds at the time of issuance. If these
market conditions persist, this could have a negative impact on firms' financing environment,
such as issuance conditions for corporate bonds. Therefore, in order to improve market
functioning while maintaining accommodative financial conditions, the Bank decided to
modify the conduct of yield curve control.
As the range of 10-year JGB yield fluctuations has been expanded, long-term interest rates
have risen accordingly. However, in continuing with monetary easing under the framework
of yield curve control going forward, the expansion has a greater merit of facilitating the
transmission of monetary easing effects by improving the functioning of bond markets.
As I have explained thus far, Japan's economy has started to show signs of a virtuous cycle,
as evidenced by the overall high levels of corporate profits and moves to increase wages.
However, it is premature to conclude that the price stability target has been achieved. Thus, I
believe that, in its conduct of monetary policy for the time being, it is necessary for the Bank
to maintain monetary easing and thereby support the economy.
Thank you.
Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Fukushima
March 1, 2023
NAKAGAWA Junko
Member of the Policy Board
Bank of Japan
Chart 1
Overseas Economies
World Economic Outlook Global PMI
y/y % chg.
s.a., DI
8
60
IMF
projections
55
6
50
4
45
2
40
35
0
30
Manufacturing
World
-2
25
Services
-4
20
90 95 00 05 10 15 20
CY
07 09 11 13 15 17 19 21 23
CY
Chart 2
Corporate Sector in Japan
Corporate Profits Business Conditions
DI ("favorable" - "unfavorable"), % points
s.a., tril. yen s.a., tril. yen
60
400 25
All industries
40
380
Manufacturing
20
Nonmanufacturing
20
360
15
340 0
10
-20
320
"Favorable"
Sales (left scale)
5
-40
300
Current profits
"Unfavorable"
(right scale)
-60
280 0
90 95 00 05 10 15 20
CY 07 09 11 13 15 17 19 21 CY
Notes: 1. Based on the Notes: 1. Based on the Tankan. All enterprises. There is a discontinuity in the data for
Financial Statements Statistics of Corporations by Industry, Quarterly.
Excluding "finance and insurance." December 2003 due to a change in the survey framework.
2. Shaded areas denote recession periods.
2. Figures from 2009/Q2 onward exclude pure holding companies.
3. Shaded areas denote recession periods. Source: Bank of Japan.
Source: Ministry of Finance. .
Chart 3
Corporate Sector in Japan
Industrial Production Real Exports
s.a., CY 2015=100
s.a., CY 2015=100
120
120
110
110
100
90
100
80
90
Production Real exports
70
60
80
07 09 11 13 15 17 19 21 23
CY 07 09 11 13 15 17 19 21 23 CY
Notes: 1. Shaded areas denote recession periods.
Notes: 1. Shaded areas denote recession periods.
2. The figure denoted by the circle to the right is calculated using projections
2. Based on Bank staff calculations. The figure for 2023/Q1 is that for January.
by the Ministry of Economy, Trade and Industry for January and February 2023. Sources: Ministry of Finance; Bank of Japan.
Source: Ministry of Economy, Trade and Industry.
Chart 4
Household Sector in Japan
Private Consumption Consumption Activity Index (CAI, Real)
s.a., CY 2015=100
s.a., 2017/Q1=100 s.a., 2017/Q1=100
110
105 115
110
100
105
105
95
100
100
90
95
95
85
90
90
Consumption Activity Index (travel 80
85
balance adjusted, real)
Nondurable
85
75 goods <40.5>
80
Services <50.7>
Durable goods <8.9>
80
70 75
CY 12 13 14 15 16 17 18 19 20 21 22
17 18 19 20 21 22 17 18 19 20 21 22
CY
Note: Figures for the Consumption Activity Index (CAI) are based on Bank staff Notes: 1. Based on Bank staff calculations. Figures in angle brackets show the weights
calculations. The CAI figures (travel balance adjusted) exclude inbound in the CAI.
tourism consumption and include outbound tourism consumption. 2. Nondurable goods include goods classified as semi-durable goods in the SNA.
Source: Bank of Japan. Sources: Bank of Japan, etc.
Chart 5
Household Sector in Japan
Consumption of Services Consumption of Durable Goods
s.a., CY 2015=100 s.a., ann., mil. units
s.a., CY 2015=100
140 6 160
150
120
140
5
100
130
120
80
4 110
60
100
90
40 New passenger car registrations
3
(including small cars with engine sizes
Total number of overnight guests
80
(excluding inbound visitors) up to 660cc, left scale)
20
Sales of household electrical appliances
70
Sales in the food services industry
(real, right scale)
2 60
0
CY 12 13 14 15 16 17 18 19 20 21 22 23
12 13 14 15 16 17 18 19 20 21 22
CY
Note: Figures for real sales of household electrical appliances are based on Bank staff
Sources: Japan Foodservice Association,
Market Trend Survey of the Food Services Industry;
calculations using the retail sales index of machinery and equipment in the
Japan Tourism Agency.
Current Survey of Commerce and the price index of related items in the CPI.
Sources: Japan Automobile Dealers Association; Japan Light Motor Vehicle and
Motorcycle Association; Ministry of Economy, Trade and Industry; Ministry
of Internal Affairs and Communications.
Chart 6
Employment and Income Situation in Japan
Various Measures of Labor Market Conditions
CY 1990-2019 avg.=0, standard deviation CY 1990-2019 avg.=0, standard deviation
2
3
Labor shortage
Labor shortage
2
1
1
0
0
-1
-1
-2
Employment rate gap
-2
Unemployment rate
Active job openings-to-applicants ratio
Short-term unemployment rate
-3
-3 Employment Employment conditions conditions DI DI (Tankan) ( )
Long-term unemployment rate
Labor input gap
-4 -4
CY 80 85 90 95 00 05 10 15 20 CY 80 85 90 95 00 05 10 15 20
Notes: 1. Figures for each measure of labor market conditions are normalized by the standard deviation from 1990 to 2019.
2. Figures for the active job openings-to-applicants ratio and the unemployment rate for 2022/Q4 are October-November averages.
3. The labor input gap and the employment rate gap are Bank staff estimates.
4. Figures for the short- and long-term unemployment rates up through 2001 are on a semiannual or annual basis.
Sources: Ministry of Health, Labour and Welfare; Ministry of Internal Affairs and Communications; Bank of Japan, etc.
Chart 7
Employment and Income Situation in Japan
Number of Employed Persons Employee Income
s.a., mil. persons s.a., CY 2019=100 y/y % chg.
68 105 4
67
100
2
66
95
65
90
0
64
85
63
-2
Employed persons (left scale) Total cash earnings
80
Number of employees
Regular employees (right scale)
62
Employee income
Non-regular employees (right scale)
61 75
-4
CY 07 09 11 13 15 17 19 21 12/Q1 14/Q1 16/Q1 18/Q1 20/Q1 22/Q1
Note: Figures for regular employees and non-regular employees prior to 2013 are
Notes: 1. Q1 = March-May, Q2 = June-August, Q3 = September-November,
based on the "detailed tabulation" in the Labour Force Survey.
Q4 = December-February. The figure for 2022/Q4 is that for December.
Source: Ministry of Internal Affairs and Communications. 2. Employee income = Total cash earnings × Number of
(Monthly Labour Survey)
employees (Labour Force Survey)
3. Figures from 2016/Q1 onward are based on continuing observations following the
sample revisions of the Monthly Labour Survey.
Sources: Ministry of Health, Labour and Welfare; Ministry of Internal Affairs and
Communications.
Chart 8
Producer Prices
Final Demand-Intermediate Demand (FD-ID)
Goods and Services Prices
Price Indexes (All Commodities)
y/y % chg.
CY 2015=100
12
170
10 160
ID index (stage 1)
ID index (stage 2)
150
8
ID index (stage 3)
140 ID index (stage 4)
6
FD index (excluding exports)
130
4
120
2
110
0
100
-2
PPI
90
SPPI
-4
80
-6
70
CY 15 16 17 18 19 20 21 22 23
CY 15 16 17 18 19 20 21 22 23
Note: Figures exclude the effects of the consumption tax hike.
Note: The indexes divide demand into the final demand stage and four stages of intermediate
Source: Bank of Japan.
demand based on the Input-Output Tables for Japan. Goods and services prices are
then aggregated according to the stage to which they belong to compile the FD index
and the ID indexes for stages 1 to 4, ranging from the upstream to downstream stages
of the production process.
Source: Bank of Japan.
Chart 9
Consumer Prices
CPI (Less Fresh Food) CPI (Excluding Temporary Factors)
y/y % chg.
y/y % chg.
3.5
4.5
Mobile phone charges
4.0
3.0
Effects of travel subsidy programs
3.5
Effects of the consumption tax hike and
Administered prices
3.0
2.5
free education policies
General services
2.5 Energy
2.0 Goods (less food)
2.0
Excluding the above factors
Food
1.5
CPI (less fresh food) 1.5
CPI (less fresh food and energy)
1.0
0.5
1.0
0.0
0.5
-0.5
-1.0
0.0
-1.5
-2.0 -0.5
17 18 19 20 21 22 23 CY 17 18 19 20 21 22 23
CY
Notes: 1. "Food" consists of "food products" and "agricultural, aquatic, and livestock products."
Notes: 1. Figures for "energy" consist of those for petroleum products, electricity, as well
2. "Administered prices" excludes energy prices and consists of public services and
as manufactured and piped gas charges.
water charges.
2. Figures for the "effects of the consumption tax hike and free education policies"
3. The CPI figures are Bank staff estimates and exclude the effects of the consumption
from April 2020 onward are Bank staff estimates and include the effects of
tax hike, free education policies, travel subsidy programs, and mobile phone charges.
measures such as free higher education introduced in April 2020.
Source: Ministry of Internal Affairs and Communications.
Source: Ministry of Internal Affairs and Communications.
Chart 10
Consumer Prices
Number of Years between the Latest
Change in Firms' Price-Setting Stance
and Previous Price Rises
output prices DI, % points share of firms, %
50 40
Firms cautious about changing output prices (20%)
40
Other firms (80%)
30
30
20
10
20
0
-10
10
-20
-30
-40 0
less 1-4 5-9 10-14 15-19 20-24 25-29 30 yrs.
07 09 11 13 15 17 19 21
CY
than yrs. yrs. yrs. yrs. yrs. yrs. and
1 yr. over
Note: The panel shows the distribution of firms that responded that they had raised their
Note: Figures are for all industries and enterprises in the Tankan survey. Figures for "firms
output prices since the September 2021 Tankan survey in terms of the number of
cautious about changing output prices" are for firms that replied that their output
years that had passed until the first price rise since that survey from the previous
prices were "unchanged" for at least about 95 percent of the period from 1991 to 2019.
price rise. Firms are selected on the basis of being "cautious about changing output
The dotted lines represent forecasts from the September 2022 survey.
prices," having replied that their output prices were "unchanged" for at least about 95
Source: Ikeda, S. et al., "Firms' Recent Price-Setting Stance: Evidence from the
Tankan,"
percent of the period from 1991 to 2019.
Bank of Japan Review Series, no. 23-E-2 (February 2023),
Source: Ikeda, S. et al., "Firms' Recent Price-Setting Stance: Evidence from the Tankan,"
https://www.boj.or.jp/en/research/wps_rev/rev_2023/data/rev23e02.pdf.
Bank of Japan Review Series, no. 23-E-2 (February 2023),
https://www.boj.or.jp/en/research/wps_rev/rev_2023/data/rev23e02.pdf.
Chart 11
Consumer Prices
DI of Price Changes Measures of Core Inflation
% points y/y % chg.
%
80 90 3.5
DI (left scale) Trimmed mean
70
Share of increasing items (right scale) 3.0 Weighted median
60 80
Share of decreasing items (right scale)
Mode
50
2.5
40 70
2.0
30
20 60
1.5
100 50 1.0
-10
0.5
-20 40
-30
0.0
-40 30
-0.5
-50
-60 20
-1.0
-70
-80 10 -1.5
CY 07 09 11 13 15 17 19 21 23 CY 07 09 11 13 15 17 19 21 23
Note: The diffusion index (DI) is defined as the share of increasing items minus the
Note: All figures are based on Bank staff calculations using the CPI excluding the
share of decreasing items. The share of increasing/decreasing items is the share
effects of the consumption tax hikes, free education policies, and travel
of items for which price indices increased/decreased from a year earlier. Based on
subsidy programs. The CPI figures from April 2020 onward are Bank staff
Bank staff calculations using the CPI (less fresh food) excluding the effects of the
estimates and exclude the effects of measures such as free higher education
consumption tax hikes, free education policies, and travel subsidy programs. The
introduced in April 2020.
CPI figures from April 2020 onward are Bank staff estimates and exclude the
Sources: Ministry of Internal Affairs and Communications; Bank of Japan.
effects of measures such as free higher education introduced in April 2020.
Sources: Ministry of Internal Affairs and Communications; Bank of Japan.
Chart 12
Outl