• Replicating Japan’s CPI Using Scanner Data
  Satoshi ImaiTsutomu Watanabe

  Abstract

  We examine how precisely one can reproduce the CPI constructed based on price surveys using scanner data. Specifically, we closely follow the procedure adopted by the Statistics Bureau of Japan when we sample outlets, products, and prices from our scanner data and aggregate them to construct a scanner data-based price index. We show that the following holds the key to precise replication of the CPI. First, the scanner databased index crucially depends on how often one replaces the products sampled. The scanner data index shows a substantial deviation from the actual CPI when one chooses a value for the parameter associated with product replacement such that replacement occurs frequently, but the deviation becomes much smaller if one picks a parameter value such that product replacement occurs only infrequently. Second, even when products are replaced only infrequently, the scanner data index differs significantly from the actual CPI in terms of volatility. The standard deviation of the scanner data-based monthly inflation rate is 1.54 percent, which is more than three times as large as that for actual CPI inflation. We decompose the difference in volatility between the two indexes into various factors, showing that it mainly stems from the difference in price rigidity for individual products. We propose a filtering technique to make individual prices in the scanner data stickier, thereby making scanner data-based inflation less volatile.

  Introduction

  Scanner data has started to be used by national statistical offices in a number of countries, including Australia, the Netherlands, Norway, Sweden, and Switzerland, for at least part of the production of their consumer price indexes (CPIs). Many other national statistical offices have also already started preparing for the use of scanner data in constructing their CPIs. The purpose of this paper is to empirically examine whether price indexes based on scanner data is consistent with price indexes constructed using the traditional survey based method.

  2015.06

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• Product Downsizing and Hidden Price Increases: Evidence from Japan’s Deflationary Period
  Satoshi ImaiTsutomu Watanabe

  Abstract

  Consumer price inflation in Japan has been below zero since the mid-1990s. Given this, it is difficult for firms to raise product prices in response to an increase in marginal costs. One pricing strategy firms have taken in this situation is to reduce the size or the weight of a product while leaving the price more or less unchanged, thereby raising the effective price. In this paper, we empirically examine the extent to which product downsizing occurred in Japan as well as the effects of product downsizing on prices and quantities sold. Using scanner data on prices and quantities for all products sold at about 200 supermarkets over the last ten years, we find that about one third of product replacements that occurred in our sample period were accompanied by a size/weight reduction. The number of product replacements with downsizing has been particularly high since 2007. We also find that prices, on average, did not change much at the time of product replacement, even if a product replacement was accompanied by product downsizing, resulting in an effective price increase. However, comparing the magnitudes of product downsizings, our results indicate that prices declined more for product replacements that involved a larger decline in size or weight. Finally, we show that the quantities sold decline with product downsizing, and that the responsiveness of quantity purchased to size/weight changes is almost the same as the price elasticity, indicating that consumers are as sensitive to size/weight changes as they are to price changes. This implies that quality adjustments based on per-unit prices, which are widely used by statistical agencies in countries around the world, may be an appropriate way to deal with product downsizing.

  Introduction

  Consumer price inflation in Japan has been below zero since the mid-1990s, clearly indicating the emergence of deflation over the last 15 years. The rate of deflation as measured by the headline consumer price index (CPI) has been around 1 percent annually, which is much smaller than the rates observed in the United States during the Great Depression, indicating that although Japan’s deflation is persistent, it is only moderate. It has been argued by researchers and practitioners that at least in the early stages the main cause of deflation was weak aggregate demand, although deflation later accelerated due to pessimistic expectations reflecting firms’ and households’ view that deflation was not a transitory but a persistent phenomenon and that it would continue for a while.

  2013.06

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