The Bank of Japan has released a research paper examining the dynamics of price pressures in Japan since the onset of rising prices in 2020. This study focuses on the Final Demand-Intermediate Demand Price Indexes, providing insights into how price fluctuations are transmitted across various production stages.

Notably, the findings reveal significant disparities in price increases between Japan and the United States. While Japan experienced larger price hikes at upstream stages—particularly for energy and raw materials—downstream price increases were more modest when compared to its American counterpart. This suggests a restrained overall goods price pass-through mechanism within Japan.

The paper further indicates that, despite the restrained nature of price transmission, there has been an uptick in price pass-through activity in several sectors when compared to the pre-2020 period. This nuanced understanding of inflation dynamics is crucial for policymakers as they navigate post-pandemic economic recovery and inflation management.

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Official Source: Bank of Japan