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Pass-Through of Cost-Push Pressures to Consumer Prices

November 30, 2022
Tomoyuki Yagi*1
Yoshiyuki Kurachi*2
Masato Takahashi*3
Kotone Yamada*4
Hiroshi Kawata*5


Costs of intermediate inputs as well as those for product procurement facing Japanese firms have been rising markedly against the backdrop of international commodity price increases and of the depreciation of the yen, as global economy recovers from the COVID-19 pandemic. In this paper, we quantitatively measure the so-called "pass-through rate" - that is, the impact of an increase in cost-push pressures on consumer prices (namely, prices at the final demand stage) - and examine the recent changes and their context. The estimation results yield the following two implications. First, the exchange rate pass-through rate has been increasing in recent years reflecting higher import penetration. Second, the pass-through rate of raw material and other costs, excluding those attributable to exchange rate, have somewhat increased at the intermediate demand stage and even for some items at the final demand stage. Since the pass-through rates depend on: (i) the strength of cost-push pressures; (ii) the business cycle; and (iii) the tightness of demand and supply condition due partially to the pandemic, their developments should be monitored closely.

JEL classification
E30, E31, F31

Cost-Push Pressures, Intermediate Input Costs, Exchange Rates, Consumer Prices, Pass-Through, COVID-19

The work in this paper was presented in the first session of "The Phillips Curve and Cost Pass-Through in Japan," the second workshop in "Issues Surrounding Price Developments during the COVID-19 Pandemic" held at the Bank of Japan on May 30, 2022. The analyses in this paper are based on the data available at the time. The authors thank Kosuke Aoki, Shin-Ichi Fukuda, Ryo Jinnai, Seisaku Kameda, Masayuki Morikawa, Etsuro Shioji, Kazuo Ueda, Takashi Unayama, Tsutomu Watanabe, and staff members of the Bank of Japan for their valuable comments. Any remaining errors are our own. The views expressed in this paper are those of the authors and do not reflect the official views of the Bank of Japan.

  1. *1Research and Statistics Department, Bank of Japan
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  2. *2Research and Statistics Department, Bank of Japan
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  3. *3Research and Statistics Department (currently at the Personnel and Corporate Affairs Department), Bank of Japan
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  4. *4Research and Statistics Department (currently at the Secretariat of the Policy Board), Bank of Japan
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  5. *5Research and Statistics Department, Bank of Japan
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