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Performance of Core Indicators of Japan's Consumer Price Index

November 20, 2015
Shigenori Shiratsuka
Monetary Affairs Department

The Bank of Japan (BOJ), in conducting monetary policy, employs the core indicators of the consumer price index (CPI) to identify the underlying trend of inflation by excluding various idiosyncratic disturbances from the overall CPI. Considering that sources of such idiosyncratic disturbances are not always constant over time, this article examines the performance of the core indicators by focusing on the stability over the estimation period. Empirical evidence reveals that the CPI excluding fresh food and trimmed mean generally show better performance than other indicators. It also shows that the performance of the CPI excluding fresh food is deteriorating currently, even though such deterioration, affected by large swings in crude oil prices, is likely to be temporary. In examining the underlying trend of inflation and explaining it to the public, it is thus important to consider various indicators, such as trimmed mean, and the CPI excluding fresh food and energy, even though the CPI excluding fresh food remains a main indicator, considering its high public awareness.


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-7, is a translation of the original Japanese version, 2015-J-12, published in November 2015. The views expressed in the Review are those of the author and do not necessarily represent those of the Bank of Japan.

If you have comments or questions, please contact the Policy Studies Division, Monetary Affairs Department (Tel:+81-3-3279-1111).