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# Outline of the Corporate Goods Price Index (CGPI, 2020 base)

June 2022
Bank of Japan
Research and Statistics Department

## Basic Information

Compilation section: Price Statistics Division, Research and Statistics Department

Frequency of compilation: Monthly

Time of release: In principle, figures are released on the eighth business day of the month following the reference month (the scheduled retroactive revision in September is released on the ninth business day of the month).

Method of release: Bank of Japan's website
Information Room at the Bank's Head Office (weekdays, 8:50 a.m. to 5:00 p.m. JST)

Publication: Financial and Economic Statistics Monthly

Commencement of data:

Commencement of statistics: January 1887

Commencement of linked indexes in the 2020 base:
Indexes for groups or higher-order classifications: January 1960
Commodity indexes: January 1980

Commencement of Prewar Base Index (The base period: 1934-1936 average = 1): October 1900

## 1. Scope of the Survey

• The Corporate Goods Price Index (hereinafter, the CGPI) covers goods traded in the corporate sector. 1 The prices of products (goods) with the quality and contract terms fixed are continuously surveyed and the current prices are indexed by setting the prices in the base period (CY2020) equal to 100.
1. The CGPI is the collective term for the three basic grouping indexes, Producer Price Index (PPI), Export Price Index (EPI), and Import Price Index (IPI). The PPI generally corresponds to the global standard as it covers domestically-produced and domestically-traded goods in the corporate sector, and is compiled, in principle, by surveying prices at the time of shipment in the producer stage.
• Number of sample prices (as of March 2022)
• Producer Price Index (PPI): 4,346
• Export Price Index (EPI): 1,195
• Import Price Index (IPI): 1,347

## 2. Contents of Statistical Data

### (1) Overview, Purpose and Application

The CGPI measures the price developments of goods traded in the corporate sector. One of the purposes of the index is to grasp the supply-demand trend in goods, in order to provide information as an economic indicator for assessing economic developments and monetary policy, through collecting prices of goods traded in the corporate sector.

Also, the CGPI is used as a deflator in calculating real values by removing price factors from nominal values, and is cited as a reference index for the price-setting activities in the corporate sector.

### (2) Structure, Classification and Weights

The basic grouping indexes, in which commodities are classified based on Japan Standard Industrial Classification or partly on the attribute of products, are composed of Producer Price Index (PPI), Export Price Index (EPI), and Import Price Index (IPI). The reference indexes are composed of Producer Price Index using Chain-weighted Index Formula, Producer Price Index excluding Consumption Tax, Prewar Base Index, Passenger cars (for North America) and Passenger cars (except for North America), and Investment Goods Index.

#### (a) Basic grouping indexes

##### Producer Price Index (PPI)

For the PPI, the Bank surveys prices of domestically-produced and domestically-traded goods except goods exported via domestic market in the corporate sector, mainly at the time of shipment by producers. In the 2020 base, the PPI is classified into five major groups and further classified into 23 groups. The PPI is compiled including the consumption tax.

In addition, indexes excluding extra charges for summer electricity, which adjust extra charges applied during summer season from July to September, are compiled as reference. The levels of these indexes correspond to those of the basic grouping indexes during the normal charge period from October to June.

Regarding the weight calculation, the average value of 2019 shipments to domestic market (deducing the export value of 2019 in the Trade Statistics of Japan from the value of shipments in the Census of Manufacture 2019) and 2020 shipments to domestic market (deducing the export value of 2020 in the Trade Statistics of Japan from the value of 2020 shipments estimated by using the percent change from the previous year in dynamic statistics such as the Current Survey of Production, based on the value of shipments in the Census of Manufacture 2019) is used. In cases where the transaction values cannot be calculated from the above data sources (e.g. non-manufacturing products), the Bank uses other statistics published by government agencies or industry organizations accordingly.

##### Export Price Index (EPI) and Import Price Index (IPI)

The stage and timing of price collection of goods for the EPI and IPI are at the time when the cargo is loaded and unloaded in Japan at the customs clearance stage, respectively. These indexes are compiled in both yen basis and contract currency basis. In the 2020 base, the EPI and IPI are classified into seven groups and 10 groups, respectively. The prices surveyed for the EPI and IPI do not include consumption tax.

The average trade values of 2019 and 2020 in the Trade Statistics of Japan by the Ministry of Finance are used for weight calculation of EPI and IPI.

#### (b) Reference indexes

##### Producer Price Index using Chain-weighted Index Formula (Chain-weighted PPI)

Chain-weighted PPI is calculated by using the chain-weighted Laspeyres formula. The weights of Chain-weighted PPI are updated annually. The index after the base year is compiled by multiplying the change rates of index levels which reset to 100 every December. It is compiled including the consumption tax. Indexes excluding extra charges for summer electricity are also complied for reference.

##### Producer Price Index excluding Consumption Tax (PPI excluding Consumption Tax)

PPI excluding Consumption Tax is compiled using prices excluding the consumption tax.

##### Prewar Base Index (PBI)

In order to respond to users' needs for analyzing long-term time series data, PBI is compiled by rearranging the basic grouping indexes in consistent with the Prewar Base Index classification.

##### Passenger cars (for North America) and Passenger cars (except for North America)

Regarding commodities "Passenger cars" in the EPI, indexes by destination are compiled by re-categorizing sample prices on both yen basis and contract currency basis.

##### Investment Goods Index

The Investment Goods Index is compiled by reclassifying the PPI excluding the consumption tax and IPI in terms of investment use (construction materials, capital goods).

### (3) Base Year for Index and Weight

The calendar year 2020 is used as the base year for the indexes. The average value of 2019 and 2020 is used as the base year for weight.

### (4) Selection of Commodities

#### Criteria for adopting individual commodities

##### Producer Price Index (PPI):

In principle, the Bank selects each commodity with the transaction value of no less than 3/10,000 (66.9 billion yen) of the "total transaction value for the index," i.e. the total value of shipments of domestically-produced and domestically-traded goods, in the base year (CY2020).

##### Export Price Index (EPI) and Import Price Index (IPI):

In principle, the Bank selects each commodity with the transaction value of no less than 5/10,000 (32.8 billion yen and 34.5 billion yen for the EPI and IPI, respectively) of the "total transaction values for the indexes," i.e. the total value of exports and imports, in the base year (CY2020).

#### Number of commodities

The number of commodities is 515 for the PPI, 184 for the EPI, and 210 for the IPI.

### (5) Sample Prices

#### Scope and methods of the survey

(i) The price survey is generally conducted to companies that manufacture products comprising selected commodities or wholesale companies that engage in import or export transactions. However, for some commodities, (ii) prices from other statistics and databases are adopted in order to improve index accuracy and to reduce reporting costs for companies.

The Bank surveys the prices of a month by sending questionnaires to the reporting companies by mail or online at the beginning of the following month. In principle, the Bank collects questionnaires in time for the release of the preliminary figures. If the price data are not collected by the time of the calculation of preliminary figures, they will be reflected in indexes published in the following month or later.

#### Survey items

The CGPI continuously surveys prices of products with constant quality. Thus, in addition to the price of products, the Bank asks reporting companies; the contents of the products (material, performance, grade, etc.), counterparties (usage, customer), transaction conditions (delivery condition, etc.), and other various conditions that determine the quality (such as quantity of transaction) which may affect prices. These procedures aim to fix the quality of the sample prices as much as possible. The prices and transaction conditions collected from reporting companies are called "sample prices" altogether.

#### Selection of sample prices

According to a wide variety of products and the development in price differentiation of products, even within the same commodity classification, sample prices are selected considering the difference in price trends originating from varieties in transaction conditions such as reporting companies, products, usage, and customers. Observing the composition ratios in each transaction condition, the composition of sample prices in each commodity will be adjusted to the observed composition ratio in order to improve the index accuracy.

The Bank reviews the composition of sample prices as appropriate not only in the process of rebasing, but also in the term other than rebasing.

#### Criteria for setting sample prices (stage of price survey, timing of survey, price condition, currency)

Among various conditions composing of sample prices, each condition such as transaction stage and time of price collection, is unified as much as possible. In the PPI, prices at the time of shipment in the producer stage are basically surveyed. The rate of the producer stage as the stage of price collection in the PPI is over 95 percent on the weight base (as of March 2022). Moreover, the prices surveyed in the EPI are the FOB (free on board) prices at the time when the cargo is loaded at the customs clearance stage, while the prices in the IPI are the CIF (cost, insurance, and freight) prices at the time when the cargo is unloaded at the same stage.

In addition, regarding the currency, sample prices contracted in Japanese yen are surveyed in yen while the ones contracted in foreign currencies are surveyed in foreign currencies.

For indexes based on contract currencies, sample prices denominated in contract currencies are directly used to construct the indexes. On the other hand, for indexes in yen basis, sample prices contracted in foreign currencies are converted into prices in yen, using telegraphic transfer spot exchange rates (monthly average, middle rate).

#### Varieties of survey prices

In conducting price surveys to reporting companies, actual transaction prices of constant quality are basically surveyed to reflect pure price changes ((i) Direct use of prices of repeated transactions). However, if continuous price survey with constant quality is difficult, the following methods are adopted by alleviating some conditions of constant quality; (ii) the Average price method to survey average prices by grouping multiple transactions with similar quality; (iii) the Model price method to survey prices assuming representative transactions; (iv) the List price method to survey standard prices which are deemed to be a guide in actual transactions.

Varieties of Survey Prices
Varieties of survey prices Explanation of survey prices
Specification pricing method
(Direct use of prices of repeated transactions)
• Actual prices with its transaction condition which determines the quality, fixed as needed.
Average price method
(Unit value method)
• Average price where multiple transactions for similar products with different quality in products, counterparties, etc. are grouped, so long as constant quality is guaranteed.
• Average price derived from the average discount rate of the group composed of similar products, and the list price of the representative product in the group, i.e. list price multiplied by (1 - average discount rate).
Model pricing method Model pricing method assuming representative transaction conditions
• Prices of continuous trades assuming virtual representative transaction condition.
Model pricing method using average discount rate
• Prices derived from "fixed prices" assuming virtual product models and "discount rate" of the product group. The model assumes the virtual product to be unchanged and continuously traded.
Model pricing method using profit margin or cost to sales ratio
• Prices derived from "manufacturing cost" assuming virtual product models and "profit margin" or "cost to sales ratio" of total product group. The model assumes the virtual product to be unchanged and continuously traded.
List price method
• Prices used as standard prices (e.g. quoted price/invoice price, discount price, list price) in actual transaction specifying the contents of products

#### Treatment of missing prices

In the reference month, if there were no transaction under the conditions specified for sample prices or there were no responses from the reporting companies by the time of the calculation of indexes, prices of the month are treated as "missing prices." In principle, missing prices are imputed by the prices in the previous month. Depending on the characteristics of the sample prices, missing prices may also be imputed by the year-on-year rate of change in the previous month of the price or by the month-on-month rate of change in other sample prices within the same commodity. In addition, missing prices for some seasonal products are imputed by the average prices in the sales season. With respect to products with later-determined prices or for which payments are subsequently settled, missing prices are imputed by, if available, prices that are provisionally set. The imputed prices will be replaced with the actual prices when the price data are obtained afterward.

### (6) Sample Price Replacement and Quality Adjustment Method

#### Sample price replacement

It is the principle of the CGPI to survey product prices continuously with fixed quality. However, under the circumstance where consumer behaviors change and technology innovates, products in actual transaction change quite frequently. This leads to suspension of production or decrease in transaction amounts of the products surveyed in the CGPI. Moreover, there are companies that terminate the production of products or withdraw from the market. In these cases, "sample price replacement" is conducted to change reporting companies, surveyed products, and counterparties and terms of transactions, etc. which were set at the start of surveys.

At the time of sample price replacement, it is endeavored to reflect only "pure price change" to price indexes, after removing "price change resulting from quality changes" by using the following quality adjustment method.

However, when ascertaining "price change resulting from quality change" is difficult, the index will be treated as if it was unchanged.

The following nine quality adjustment methods are applied; (i) the direct comparison method, (ii) the unit price comparison method, (iii) the overlap method, (iv) the production cost method, (v) the hedonic regression method, (vi) the attribute cost adjustment method, (vii) the option cost method, (viii) the fuel efficiency method, and (ix) the webscraped prices comparison method.

Name Explanation of methods
For all commodities Direct comparison method Method to assume the price difference between an old and new product as pure price change, by judging that the difference in quality is negligible.
Unit price comparison method Method to assume the price difference between an old and new product as pure price change, as long as the quantity is fixed, by judging that there are no differences in quality, other than its quantity.
Overlap method Method to assume the price difference between an old and new product as price change resulting from quality change, when both old and new products are sold simultaneously throughout a period of time under the same conditions, and the relative price between them is stable.
Production cost method Method to assume the production cost required for quality change between an old and new product obtained from reporting companies as a price change originating from quality change. The remaining part is treated as pure price change.
For specified commodities Hedonic regression method Method to quantitatively estimate the price change caused by the quality change from changes in various characteristics between an old and new product, using the regression equation. If the price difference among products is considered to result from quality difference measured by the common characteristics of these products, the remaining part of the price change is treated as pure price change.
Attribute cost adjustment method Method to assume the price difference in major parts between an old and new product as price change resulting from quality change, and to treat the remaining part of the price change as pure price change when judging that the sum of major parts' prices causing the difference in quality, is equivalent to the price of product.
Option cost method Method to assume 50 percent of option prices of the old product is equivalent to price change resulting from quality change, and to treat the remaining part of the price change as pure price change when the equipment regarded as an option in the old product became standardized in the new product.
Fuel efficiency method Method to assume prices of the improved fuel efficiency converted into monetary amount as price change resulting from quality change, and to treat the remaining part of the price change as pure price change when the main quality difference between an old and new product corresponds to the one resulting from energy saving performance.
Webscraped prices comparison method Method to assume 50 percent of the difference in webscraped retail prices between an old and new product is equivalent to price change resulting from quality change, and to treat the remaining part of the price change as pure price change.

### (7) Index Formula

#### (a) Fix-weighted Laspeyres formula

##### Aggregation formula

The fix-weighted Laspeyres formula, which is a weighted arithmetic mean based on fixed value-based weights set in the base period (CY2020), is adopted for the index calculation.

##### Aggregation method for commodity indexes

For each sample price, an individual sample price index is calculated by dividing the reported price (current price) by the average price in the base year (base year price). Commodity indexes are calculated by multiplying this sample price index with each sample price weight (weighted index of sample price), and then dividing the sum of the weighted indexes of all sample prices which belong to each commodity by the weight of that commodity.

##### Aggregation method for indexes of higher-order classifications

As for higher-order classifications such as All commodities, major groups, groups, subgroups, and commodity classes, indexes are also calculated with the same calculation method as for commodity indexes; by dividing the sum of weighted index of all sample prices which belong to each classification by the weight of that classification.

#### (b) Chain-weighted Laspeyres formula

The PPI using Chain-weighted Index is published for higher-order classifications than commodities. The chain-weighted Laspeyres formula is adopted to aggregate the index, which is the weighted arithmetic mean based on the chained value-based weights.

### (8) Publication

#### Release schedule

In principle, preliminary figures are released at 8:50 a.m. JST on the eighth business day of the month following the reference month (the scheduled retroactive revision in September is released on the ninth business day of the month).

#### Undisclosed series of certain commodity indexes

The Bank may not disclose the index or indexes of specified commodities (i) when reporting companies face a difficulty in continuous price survey due to decrease in transactions of the whole commodity, or (ii) when confidentiality of individual company information is deemed not sufficient and is difficult to obtain approval from reporting companies.

For the commodity whose index is not published, (i) if it is difficult to continue the price survey of the whole commodity, the index of a higher-order classification, calculated by other commodities complements the index. Also, (ii) if confidentiality of individual company information is deemed not sufficient and it is difficult to obtain approval from reporting companies, such index is not published together with the index of another commodity which belongs to the same commodity class in principle, while such commodity index is incorporated in the calculation process of higher-order indexes such as the index of All commodity.3

1. 3Not only one commodity, but two commodities are not published because otherwise the index of the unpublished commodity can be calculated by both the index of the commodity class to which the unpublished index belongs and the indexes of the other commodities belonging to the same commodity class.

#### Revision of indexes

Preliminary figures are subject to revision in each of the subsequent three months as additional information becomes available. Scheduled retroactive revisions are implemented in September (at the time when preliminary figures for August are released), and applied in principle to figures released after January of the previous year. In addition to these revisions, unscheduled revisions are conducted when timely revisions are deemed necessary, such as when changes to figures have a significant impact on the index of All commodities.