(Research Paper) Characteristics of Price Developments in Japan: Summary of the First Workshop on “Issues Surrounding Price Developments During the COVID-19 Pandemic”

May 23, 2022
Monetary Affairs Department
Bank of Japan


On March 29, 2022, the first workshop on “Issues Surrounding Price Developments During the COVID-19 Pandemic”, titled “Characteristics of Price Developments in Japan”, was held at the Bank’s Head Office from Japan. Starting from the differences in consumer price developments between Japan, the United States and Europe following the COVID-19 pandemic, a lively discussion took place on the characteristics of the price developments in Japan, involving experts and academics in economics and empirical analysis.

Session 1 focused on the characteristics of lower consumer price inflation in Japan as a result of the COVID-19 pandemic compared to the United States and Europe, based on the results of an analysis using the distribution of price changes and underlying inflation indicators. Moreover, on the basis of empirical results showing that in Japan the interaction between wages and prices is weak, discussions have taken place on the link between the two, which is considered important in terms of the sustainability of inflation. In Session 2, service prices, which are one of the reasons for the differences in consumer price developments in Japan, the United States and Europe, were highlighted and measurement issues prices of services, in particular rents, were discussed. It has been pointed out that the measurement approach used can have a significant impact on the measured difference in the rate of inflation between Japan and other countries as a result of the COVID-19 pandemic.

Session 3 consisted of a panel discussion focusing on three main questions: (1) the reason for the differences in consumer price developments between Japan, the United States and Europe; (2) the outlook for future prices; and (3) monetary policy challenges based on the current price situation and outlook. Regarding (1), panelists generally agreed that the main reasons for the acceleration of inflation in the United States include the strong recovery in demand and the decline in the labor force participation rate; on the other hand, no similar development was observed in Japan, so that consumer price inflation in Japan remained low compared to the United States. With regard to (2), it was pointed out that, on the one hand, Japan faced the risk of a further decline in prices due to chronic deflationary factors in place since before the pandemic and the decline in demand caused by the prolonged impact of COVID-19; on the other hand, there is also the risk of a rise in inflation with the cost-push shock triggered by the sharp rise in commodity prices. It was then pointed out that the key factor in determining which risk is most likely to materialize is future wage developments. Regarding (3), the panelists shared the view that it is desirable to continue monetary easing in response to weak demand, while it is desirable to respond to price increases of certain items, notably l energy, through measures other than monetary policy.

  • The views expressed at the workshop and summarized in this document are those of the individual speakers and do not necessarily represent the views of the Bank of Japan or the Monetary Affairs Department.


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