Japan inflation

This page is about inflation/deflation in Japan. The main question is whether there is any sign of significant inflation developing.

Note this page is only updated every few months.


29 Apr 2013.

In recent years Japan has alternated between low levels of inflation and deflation. Currently inflation is running at -0.9%. Complacency would be out of place. The situation with government debt is grave and, if the deficit must be monetized, inflation could rise quickly.


29 Apr 2013. Data through Mar 2013.

(This series has a base year of 2010.)


Background: Japan follows standards set by the International Labor Office. The goals, assumptions and calculations are standard, and will be familiar to anyone who follows, for example, the US CPI. A few key points:

  • The goal is to follow the cost of a fixed basket of goods and services, not the cost of living (though the index is used for cost-of-living adjustments)
  • A basket of consumer items is reset every 5 years by a survey of actual purchases
  • Whenever a new item replaces an old one in the basket, the cost of quality improvements are not counted
  • For owner-occupied housing, the index includes imputed rent, based on actual rents of similar properties


The Consumer Price Index is calculated by the Statistics Bureau of the Ministry of Internal Affairs and Communications.

See also

Clippings below were used in the construction of this page

Japan and other deficit spenders will compete for global savings

27 Oct 2009. FTUSA p22.

“Tough times for government bonds after the credit crisis. David Roche”

“Japan's household savings rate has collapsed due to an ageing population which no longer saves. …

Japan will be feeding at the same trough of global savings as the US and the UK. An unprecedented 25 per cent of current global savings will be sucked up by OECD government debt financing. That will crowd out productive investment and bodes ill for inflation.”

CPI calculations follow fairly standard assumptions and methods

Undated (accessed 18 Mar 2011). Statistics Bureau FAQ.

“Q&A about the Consumer Price Index”

“Q 1 What is the Consumer Price Index (CPI)?

A: The CPI is an index to measure the average price movements of various goods and services purchased by households throughout the country. The index shows changes in the total amount of expenditure required to purchase the equivalent goods and services purchased by households in the base year, setting the consumption structure.

Thus, it is necessary to pay attention that the CPI intends to measure the price movements themselves, not to measure movements of living expenses with changes of varieties, qualities or quantities of goods and services resulted from the changes of households’ lifestyles or preferences.

Q 2: How is the CPI used?

A: … For national pension and employee’s pension, it is set in law to correct actual benefit level according to price movements and the CPI is used as an indicator to show these movements. In addition to this, the CPI is also used as the basis for the decision of financial policy in Bank of Japan. …

Q 3: How is the CPI calculated?

A: CPI items are selected in the order of the percentage of household consumption expenditure among the commodities (goods and services) purchased by households. Then, weights assigned to each item are compiled based on the percentage of household consumption expenditure from the FIES.

The price of each item is mainly obtained from the results of the monthly Retail Price Survey (RPS).

First, the price indices of each item (base year = 100) are calculated, using the average prices by surveyed municipality, then they are averaged by weights assigned to each item (the percentage of household consumption expenditure) and the indices for the subgroups, the ten major groups, and the general index are calculated.

Currently, the base year of the CPI is 2005 and it is revised every five years (base revision). The items and weights for the CPI are reviewed together with this base revision. The number of CPI items in 2005 base is 584. For new goods or services spreading rapidly and gaining consumption share to some extent, we will review the items before the next revision. …

Q 5: Are there any international standards in calculating the CPI?

A: International Labour Office (ILO) establishes the international standards on the CPI. At the 17th International Conference of Labour Statisticians held in Geneva in December 2003, the international standards on the CPI were reviewed and the new standards were adopted as a resolution. In tandem with this, ' The Consumer Price Index Manual: Theory and Practice ', revised version of an international manual on the CPI, was completed and released on ILO homepage. The CPI in Japan is calculated along with the international standards. In some points, however, there is no ‘best’ way to calculate the CPI agreed internationally, and there are many points to discuss. …

Q 7: Why do the CPI and the GDP deflator move differently?

A: … The CPI and the GDP deflator are compiled by Laspeyres and Paasche formula, respectively. …

Q 8: What is the difference between the movement of average purchase price derived from the Family Income and Expenditure Survey (FIES) and the CPI?

A: … In the case of replacement of the survey specification, price change resulted from the quality change is excluded. …

Q 17: What is the imputed rent of owner-occupied houses?

A: As the purchase of housing and land is not a consumption expenditure but acquirement of property, it is not included in the CPI. But households living in owned houses actually receive services from their houses. And it originally comes from the purchase of their housing and land, and many owners are repaying their housing loan. Thus, the problem, how to measure the housing cost of owner-occupied houses, arises.

If owned houses were rented, owners have to pay rents. So, from the rents of rented houses, a value which is equivalent to the services from owned houses could be estimated, and this value can be considered as a housing cost. Based on this concept, assuming that owned houses were rented, the rent paid to owner-occupied houses is included in the CPI (called ‘imputed rent’).

In calculation, weights based on the imputed rent of owner-occupied houses by National Survey of Family Income and Expenditure are calculated by their structure and size. And the ‘house rent, private’ by RPS is substituted for the monthly price change of the imputed rent. The concept of imputed rent is not only used in the CPI, but also used in System of National Accounts (93SNA) in many advanced countries.”