Abstract

Large-scale household inventory buildups occurred in Japan five times over the last decade, including those triggered by the Tohoku earthquake in 2011, the spread of COVID-19 infections in 2020, and the consumption tax hikes in 2014 and 2019. Each of these episodes was accompanied by considerable swings in GDP, suggesting that fluctuations in household inventories are one of the sources of macroeconomic fluctuations in Japan. In this paper, we focus on changes in household inventories associated with temporary sales and propose a methodology to estimate changes in household inventories at the product level using retail scanner data. We construct a simple model on household stockpiling and derive equations for the relationships between the quantity consumed and the quantity purchased and between consumption and purchase prices. We then use these relationships to make inferences about quantities consumed, consumption prices, and inventories. Next, we test the validity of this methodology by calculating price indices and check whether the intertemporal substitution bias we find in the price indices is consistent with theoretical predictions. We empirically show that there exists a large bias in the Laspeyres, Paasche, and Törnqvist price indices, which is smaller at lower frequencies but non-trivial even at a quarterly frequency and that intertemporal substitution bias disappears for a particular type of price index if we switch from purchase-based data to consumption-based data.  

Introduction

In the first week of March 2020, when the first wave of COVID-19 infections hit Japan, supermarket sales went up more than 20% over the previous year. This was due to hoarding by consumers stemming from an increase in uncertainty regarding the spread of the virus. Similar hoarding occurred during the third wave, which struck Japan in October 2020. Such hoarding has occurred not only during the COVID-19 pandemic but also after the Tohoku earthquake in March 2011 and the subsequent nuclear power plant accident in Fukushima, when residents of Tokyo and other areas that were spared serious damage went on a buying spree for food and other necessities. Consumer hoarding also occurred due to policy shocks: when the consumption tax rate was raised in April 2014 and in October 2019, people hoarded large amounts of goods just before the tax rate was raised, and a prolonged consumption slump occurred thereafter. Each of these episodes was accompanied by considerable swings in GDP, suggesting that fluctuations in household inventories are one of the sources of macroeconomic fluctuations in Japan.

WP033

2021.09

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Abstract

This paper examines the implications of consumer inventory for cost-of-living indices (COLIs) and business cycles. We begin by providing stylized facts about consumer inventory using scanner data. We then construct a quasi-dynamic model to describe consumers’ purchase, consumption, and inventory behavior. A key feature of our model is that inventory is held by household producers, not by consumers, which enables us to construct a COLI in a static manner even in an economy with storable goods. Based on this model, we show that stockpiling during temporary sales generates a substantial bias, or so-called chain drift, in conventional price indices, which are constructed without paying attention to consumer inventory. However, the chain drift is greatly mitigated in our COLI, which is based on consumption prices (rather than purchase prices) and quantities consumed (rather than quantities purchased). We provide empirical evidence supporting these theoretical predictions. We also show empirically that consumers’ inventory behavior tends to depend on labor market conditions and the interest rate.

Introduction

Storable goods are abundant in the real world (e.g., pasta, toilet rolls, shampoos, and even vegetables and milk), although most economic models deal with perishable goods for the sake of simplicity. Goods storability implies that purchases (which are often observable) do not necessarily equal consumption (which is often unobservable), and the difference between the two serves as consumer inventory. In particular, temporary sales and the anticipation of an increase in the value-added tax rate often lead to a greater increase in purchases than consumption. Moreover, the COVID-19 outbreak in 2020 caused many products, such as pasta and toilet rolls, to disappear from supermarket shelves, which would not have happened if these products were not storable. The stockpiling behavior by consumers poses challenges for economists, for example in the construction of price indices. 

WP025

WP025_Appendix

2020.08

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Abstract

Using a new micro-level dataset we investigate the relationship between the inflation experience and inflation expectations of households in Japan. We focus on the period after 1995, when Japan began its era of deflation. Our key findings are fourfold. Firstly, we find that inflation expectations tend to increase with age. Secondly, we find that measured inflation rates of items purchased also increase with age. However, we find that age and inflation expectations continue to have a positive correlation even after controlling for the household-level rate of inflation. Further analysis suggests that the positive correlation between age and inflation expectations is driven to a significant degree by the correlation between cohort and inflation expectations, which we interpret to represent the effect of historical inflation experience on expectations of future inflation rates.

Introduction

Since at least the time of Keynes (1936), economic agents’ expectations of future inflation rates have played a pivotal role in macroeconomics. Woodford (2003) describes the central importance of inflation expectations to modern macroeconomic models due to the intertemporal nature of economic problems, while Sargent (1982) and Blinder (2000) highlight the dependence of monetary policy on these expectations. However, despite the important role of inflation expectations, their formal inclusion in macroeconomic models is usually ad-hoc with little empirical justification.

WP001

2018.08

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Abstract

Japan has failed to escape from deflation despite extraordinary monetary policy easing over the past four years. Monetary easing undoubtedly stimulated aggregate demand, leading to an improvement in the output gap. However, since the Phillips curve was almost flat, prices hardly reacted. Against this background, the key question is why prices were so sticky. To examine this, we employ sectoral price data for Japan and seven other countries including the United States, and use these to compare the shape of the price change distribution. Our main finding is that Japan differs significantly from the other countries in that the mode of the distribution is very close to zero for Japan, while it is near 2 percent for other countries. This suggests that whereas in the United States and other countries the “default” is for firms to raise prices by about 2 percent each year, in Japan the default is that, as a result of prolonged deflation, firms keep prices unchanged.

Introduction

From the second half of the 1990s onward, Japan suffered a period of prolonged deflation, in which the consumer price index (CPI) declined as a trend. During this period, both the government and the Bank of Japan (BOJ) tried various policies to escape from deflation. For instance, from 1999 to 2000, the BOJ adopted a “zero interest rate policy” in which it lowered the policy interest rate to zero. This was followed by “quantitative easing” from 2001 until 2006. More recently, in January 2013, the BOJ adopted a “price stability target” with the aim of raising the annual rate of increase in the CPI to 2 percent. In April 2013, it announced that it was aiming to achieve the 2 percent inflation target within two years and, in order to achieve this, introduced Quantitative and Qualitative Easing (QQE), which sought to double the amount of base money within two years. Further, in February 2016, the BOJ introduced a “negative interest rate policy,” in which the BOJ applies a negative interest rate of minus 0.1 percent to current accounts held by private banks at the BOJ, followed, in September 2016, by the introduction of “yield curve control,” in which the BOJ conducts JGB operations so as to keep the 10-year JGB yield at zero percent. See Table 1 for an overview of recent policy decisions made by the BOJ.

2017.06

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Abstract

Using a new micro-level dataset we investigate the relationship between the inflation experience and inflation expectations of individuals in Japan. We focus on the period after 1995, when Japan began its era of deflation. Our key findings are fourfold. Firstly, we find that inflation expectations tend to increase with age. Secondly, we find that measured inflation rates of items purchased also increase with age. However, we find that age and inflation expectations continue to have a positive correlation even after controlling for the individual-level rate of inflation. Further analysis suggests that the positive correlation between age and inflation expectations is driven to a significant degree by the correlation between cohort and inflation expectations, which we interpret to represent the effect of historical inflation experience on expectations of future inflation rates.

Introduction

Since at least the time of Keynes (1936), economic agents’ expectations of future inflation rates have played a pivotal role in macroeconomics. Woodford (2003) describes the central importance of inflation expectations to modern macroeconomic models due to the intertemporal nature of economic problems, while Sargent (1982) and Blinder (2000) highlight the dependence of monetary policy on these expectations. However, despite the important role of inflation expectations, their formal inclusion in macroeconomic models is usually ad-hoc with little empirical justification.

2017.05

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Abstract

A notable characteristic of Japan’s deflation since the mid-1990s is the mild pace of price decline, with the CPI falling at an annual rate of only around 1 percent. Moreover, even though unemployment increased, prices hardly reacted, giving rise to a flattening of the Phillips curve. In this paper, we address why deflation was so mild and why the Phillips curve flattened, focusing on changes in price stickiness. Our first finding is that, for the majority of the 588 items constituting the CPI, making up about 50 percent of the CPI in terms of weight, the year-on-year rate of price change was near-zero, indicating the presence of very high price stickiness. This situation started during the onset of deflation in the second half of the 1990s and continued even after the CPI inflation rate turned positive in spring 2013. Second, we find that there is a negative correlation between trend inflation and the share of items whose rate of price change is near zero, which is consistent with Ball and Mankiw’s (1994) argument based on the menu cost model that the opportunity cost of leaving prices unchanged decreases as trend inflation approaches zero. This result suggests that the price stickiness observed over the last two decades arose endogenously as a result of the decline in inflation. Third and finally, a cross-country comparison of the price change distribution reveals that Japan differs significantly from other countries in that the mode of the distribution is very close to zero for Japan, while it is near 2 percent for other countries including the United States. Japan continues to be an “outlier” even if we look at the mode of the distribution conditional on the rate of inflation. This suggests that whereas in the United States and other countries the “default” is for firms to raise prices by about 2 percent each year, in Japan the default is that, as a result of prolonged deflation, firms keep prices unchanged.

Introduction

From the second half of the 1990s onward, Japan suffered a period of prolonged deflation, in which the consumer price index (CPI) declined as a trend. During this period, both the government and the Bank of Japan (BOJ) tried various policies to escape from deflation. For instance, from 1999 to 2000, the BOJ adopted a “zero interest rate policy” in which it lowered the policy interest rate to zero. This was followed by “quantitative easing” from 2001 until 2006. More recently, in January 2013, the BOJ adopted a “price stability target” with the aim of raising the annual rate of increase in the CPI to 2 percent. In April 2013, it announced that it was aiming to achieve the 2 percent inflation target within two years and, in order to achieve this, introduced Quantitative and Qualitative Easing (QQE), which seeks to double the amount of base money within two years. Further, in February 2016, the BOJ introduced a “negative interest rate policy,” in which the BOJ applies a negative interest rate of minus 0.1 percent to current accounts held by private banks at the BOJ, followed, in September 2016, by the introduction of “yield curve control,” in which the BOJ conducts JGB operations so as to keep the 10-year JGB yield at zero percent. See Table 1 for an overview of recent policy decisions made by the BOJ.

2017.03

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Abstract

In this study, we evaluate the effects of product turnover on a welfare-based cost-of-living index. We first present several facts about price and quantity changes over the product cycle employing scanner data for Japan for the years 1988-2013, which cover the deflationary period that started in the mid 1990s. We then develop a new method to decompose price changes at the time of product turnover into those due to the quality effect and those due to the fashion effect (i.e., the higher demand for products that are new). Our main findings are as follows: (i) the price and quantity of a new product tend to be higher than those of its predecessor at its exit from the market, implying that Japanese firms use new products as an opportunity to take back the price decline that occurred during the life of its predecessor under deflation; (ii) a considerable fashion effect exists, while the quality effect is slightly declining; and (iii) the discrepancy between the cost-ofliving index estimated based on our methodology and the price index constructed only from a matched sample is not large. Our study provides a plausible story to explain why Japan’s deflation during the lost decades was mild.

Introduction

Central banks need to have a reliable measure of inflation when making decisions on monetary policy. Often, it is the consumer price index (CPI) they refer to when pursuing an inflation targeting policy. However, if the CPI entails severe measurement bias, monetary policy aiming to stabilize the CPI inflation rate may well bring about detrimental effects on the economy. One obstacle lies in frequent product turnover; for example, supermarkets in Japan sell hundreds of thousands of products, with new products continuously being created and old ones being discontinued. The CPI does not collect the prices of all these products. Moreover, new products do not necessarily have the same characteristics as their predecessors, so that their prices may not be comparable.

2016.12

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Abstract

我が国では 1995 年から 2013 年春まで消費者物価（CPI）が趨勢的に低下するデフレが続いた。このデフレは，下落率が毎年 1%程度であり，物価下落の緩やかさに特徴がある。また，失業率が上昇したにもかかわらず物価の反応は僅かで，フィリップス曲線の平坦化が生じた。デフレがなぜ緩やかだったのか，フィリップス曲線がなぜ平坦化したのかを考察するために，本稿ではデフレ期における価格硬直性の変化に注目する。本稿の主なファインディングは以下のとおりである。第 1 に，CPI を構成する 588 の品目のそれぞれについて前年比変化率を計算すると，ゼロ近傍の品目が最も多く，CPI ウエイトで約 50%を占める。この意味で価格硬直性が高い。この状況は1990 年代後半のデフレ期に始まり，CPI 前年比がプラスに転じた 2013 年春以降も続いている。米国などでは上昇率 2%近傍の品目が最も多く，我が国と異なっている。これらの国では各企業が毎年 2%程度の価格引き上げを行うことがデフォルトなのに対して，我が国ではデフレの影響を引きずって価格据え置きがデフォルトになっていると解釈できる。第 2 に，1970 年以降の月次データを使って，前年比がゼロ近傍の品目の割合と CPI 前年比の関係をみると，CPI 前年比が高ければ高いほど（CPI 前年比がゼロからプラス方向に離れれば離れるほど）ゼロ近傍の品目の割合が線形に減少するという関係がある。インフレ率が高まると価格を据え置きに伴う機会費用が大きくなるためと解釈でき，メニューコスト仮説と整合的である。この結果を踏まえると，1990 年代後半以降の価格硬直化は，CPI 前年比の低下に伴って内生的に生じたものであり，今後 CPI 前年比が高まれば徐々に伸縮性を取り戻すと考えられる。第 3 に，シミュレーション分析によれば，長期にわたってデフレ圧力が加わると，実際の価格が本来あるべき価格水準を上回る企業が，通常よりも多く存在する状況が生まれる。つまり，「価格引き下げ予備軍」（できることなら価格を下げたいと考えている企業）が多い。一方，実際の価格が本来あるべき価格水準を下回る「価格引き上げ予備軍」は少ない。この状況では金融緩和が物価に及ぼす影響は限定的である。我が国では，長期にわたるデフレの負の遺産として，「価格引き下げ予備軍」が今なお多く存在しており，これを一掃するのは容易でない。

Introduction

我が国では 1990 年代半ば以降，消費者物価（CPI）が下落する傾向にあり，デフレーションが続いてきた。デフレからの脱却を目指し，政府と日本銀行はいくつかの施策を実施してきた。1999 年から 2000 年に日銀の政策金利であるコールレートをゼロに下げる「ゼロ金利政策」を採用したのに続き，2001 年から 2006 年には「量的緩和政策」を行った。最近では，2013 年1 月に物価上昇率の目標値として CPI 上昇率2%を掲げる物価目標政策を開始した。さらに2013 年 4 月には 2%の物価目標を 2 年以内に達成するとアナウンスし，その実現に向けてベースマネーの量を 2 年間で 2 倍にする「量的・質的緩和政策（Quantitative Qualitative Easing，QQE）」を開始した。

2015.03

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Abstract

Standard New Keynesian models have often neglected temporary sales. In this paper, we ask whether this treatment is appropriate. In the empirical part of the paper, we provide evidence using Japanese scanner data covering the last two decades that the frequency of sales was closely related with macroeconomic developments. Specifically, we find that the frequency of sales and hours worked move in opposite directions in response to technology shocks, producing a negative correlation between the two. We then construct a dynamic stochastic general equilibrium model that takes households’ decisions regarding their allocation of time for work, leisure, and bargain hunting into account. Using this model, we show that the rise in the frequency of sales, which is observed in the data, can be accounted for by the decline in hours worked during Japan’s lost decades. We also find that the real effect of monetary policy shocks weakens by around 40% due to the presence of temporary sales, but monetary policy still matters.

Introduction

Standard New Keynesian models have often neglected temporary sales, although the frequency of sales is far higher than that of regular price changes, and hence it is not necessarily guaranteed that the assumption of sticky prices holds. Ignoring this fact is justified, however, if retailers’ decision to hold sales is independent of macroeconomic developments. If this is the case, temporary sales do not eliminate the real effect of monetary policy. In fact, Guimaraes and Sheedy (2011, hereafter GS) develop a dynamic stochastic general equilibrium (DSGE) model incorporating sales and show that the real effect of monetary policy remains largely unchanged. Empirical studies such as Kehoe and Midrigan (2010), Eichenbaum, Jaimovich, and Rebelo (2011), and Anderson et al. (2012) argue that retailers’ decision to hold a sale is actually orthogonal to changes in macroeconomic developments.

2014.09

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Abstract

We construct a T¨ornqvist daily price index using Japanese point of sale (POS) scanner data spanning from 1988 to 2013. We find the following. First, the POS based inflation rate tends to be about 0.5 percentage points lower than the CPI inflation rate, although the difference between the two varies over time. Second, the difference between the two measures is greatest from 1992 to 1994, when, following the burst of bubble economy in 1991, the POS inflation rate drops rapidly and turns negative in June 1992, while the CPI inflation rate remains positive until summer 1994. Third, the standard deviation of daily POS inflation is 1.1 percent compared to a standard deviation for the monthly change in the CPI of 0.2 percent, indicating that daily POS inflation is much more volatile, mainly due to frequent switching between regular and sale prices. We show that the volatility in daily inflation can be reduced by more than 2daily inflation rate 0 percent by trimming the tails of product-level price change distributions. Finally, if we measure price changes from one day to the next and construct a chained T¨ornqvist index, a strong chain drift arises so that the chained price index falls to 10⁻¹⁰ of the base value over the 25-year sample period, which is equivalent to an annual deflation rate of 60 percent. We provide evidence suggesting that one source of the chain drift is fluctuations in sales quantity before, during, and after a sale period.

Introduction

Japan's central bank and government are currently engaged in a major experiment to raise the rate of inflation to the target of 2 percent set by the Bank of Japan (BOJ). With overcoming deflation being a key policy priority, a first step in this direction is the accurate assessment of price developments. In Japan, prices are measured by the Statistics Bureau, Ministry of Internal Affairs and Communications, and the consumer price index (CPI) published by the Statistics Bureau is the most important indicator that the BOJ pays attention to when making policy decisions. The CPI, moreover, is of direct relevance to people's lives as, for example, public pension benefits are linked to the rate of inflation as measured by the CPI.

2014.02

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Abstract

We study micro price dynamics and their macroeconomic implications using daily scanner data from 1988 to 2013. We provide five facts. First, posted prices in Japan are ten times as flexible as those in the U.S. scanner data. Second, regular prices are almost as flexible as those in the U.S. and Euro area. Third, heterogeneity is large. Fourth, during Japan’s lost decades, temporary sales played an increasingly important role. Fifth, the frequency of upward regular price revisions and the frequency of sales are significantly correlated with the macroeconomic environment like the indicators of labor market.

Introduction

Since the asset price bubble went bust in the early 1990s, Japan has gone through prolonged stagnation and very low rates of inflation (see Figure 1). To investigate its background, in this paper, we study micro price dynamics at a retail shop and product level. In doing so, we use daily scanner or Point of Sales (POS) data from 1988 to 2013 covering over 6 billion records. From the data, we examine how firms’ price setting changed over these twenty years; report similarities and differences in micro price dynamics between Japan and foreign countries; and draw implications for economic theory as well as policy.

2013.06

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Abstract

本稿では，1988 年から 2013 年まで四半世紀のスキャナーデータを用いて，トルンクヴィスト方式の日次物価指数を計測する。計測された指数の前年比は，消費者物価指数の対応する品目の計数を用いて作成した前年比とよく似た動きをしているがいくつかの重要な点で異なっている。第 1 に，日次物価指数の前年比は消費者物価指数の前年比を下回っている。両者の差はサンプル期間の平均では 0.48%であるが，差は一定ではなく，時期によって異なっている。差が最も大きいのは 1992 年から1994 年であり，バブル崩壊とともにスキャナーデータを用いた計測値が急落して1992 年 6 月にはデフレに突入しているのに対して，消費者物価指数は 1994 年夏までプラスで推移し，デフレになるのは 1994 年 10 月である。28 か月の差がある。第2 に，日次物価指数の 1 日当りの変動幅は標準偏差で見て 1.09%であり, これは, 消費者物価指数の 1 月あたりの変動幅の標準偏差（0.29%) と比べてはるかにボラティリティが大きい。これは特売などによって生じる周期成分の動きを反映していると考えられる。第 3 に，前日から当日にかけての物価上昇率を計測し，それを連鎖させるかたちで物価上昇率を計測すると，25 年間での物価変化は 10−10 となり（年率60%のデフレ），強い連鎖ドリフトが生じる。連鎖ドリフトは，物価上昇率を計測する際の 2 時点の間隔を広げるにつれて縮小し，四半期より長い時間間隔ではほぼゼロになる。

Introduction

消費者物価の上昇率を，日本銀行の物価目標である 2%まで引き上げるべく，政府と日銀による壮大な実験が繰り広げられている。デフレ脱却は最優先の政策課題のひとつであり，その第一歩は物価の現状を正確に知ることである。我が国の物価は総務省統計局によって計測されており，そこで作成される消費者物価指数は，日銀が政策判断の際に最も注目する指標である。また，消費者物価指数は，年金支給額の物価スライド幅を決める際に重要な役割を果たすなど，人々の生活にも直結している。

2013.05

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