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Core Inflation and the Business Cycle

November 20, 2015
Yoshihiko Hogen, Takuji Kawamoto, Moe Nakahama
Research and Statistics Department

We estimate various measures of core inflation which remove temporary disturbances from price indicators and examine their characteristics over the business cycle. In particular, we focus on some new measures of core inflation for Japan, the mode and weighted median inflation rates, which represent shifts in the price change distribution, as well as the CPI excluding fresh food and energy, which the Bank of Japan has recently focused on. Measures of core inflation that simply exclude volatile items closely follow the business cycle as measured by the output gap, while measures such as the mode and the weighted median are much more weakly linked to developments in the output gap.


Bank of Japan Review is published by the Bank of Japan to explain recent economic and financial topics for a wide range of readers. This report, 2015-E-6, is a translation of the original Japanese version, 2015-J-11, published in November 2015. The views expressed in the Review are those of the authors and do not necessarily represent those of the Bank of Japan.

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