Pass-Through of Cost-Push Pressures to Consumer Prices

Tomoyuki Yagi, Yoshiyuki Kurachi, Masato Takahashi, Kotone Yamada and Hiroshi Kawata
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Tomoyuki Yagi: Bank of Japan
Masato Takahashi: Bank of Japan
Kotone Yamada: Bank of Japan
Hiroshi Kawata: Bank of Japan

No 22-E-17, Bank of Japan Working Paper Series from Bank of Japan

Abstract: 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.

Keywords: Cost-Push Pressures; Intermediate Input Costs; Exchange Rates; Consumer Prices; Pass-Through; COVID-19 (search for similar items in EconPapers)
JEL-codes: E30 E31 F31 (search for similar items in EconPapers)
Date: 2022-11-30
New Economics Papers: this item is included in nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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