Expanding and Revising the Application of Hedonic Quality Adjustment in the Corporate Goods Price Index

Kentaro Fujii, Mihina Hirota, Yuriko Yamauchi, Ayako Masujima and Yasufumi Gemma
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Kentaro Fujii: Bank of Japan
Mihina Hirota: Bank of Japan
Yuriko Yamauchi: Bank of Japan
Ayako Masujima: Bank of Japan
Yasufumi Gemma: Bank of Japan

No 26-E-11, Bank of Japan Review Series from Bank of Japan

Abstract: The Corporate Goods Price Index (CGPI) employs the hedonic method for quality adjustment. This statistical method estimates the relationship between product quality and prices in an objective manner. Its strength lies in its ability to accommodate a wide range of quality variations, and it is currently applied to five items, including passenger cars. In conjunction with the process for the rebasing of the CGPI to the 2025 base year, we are considering expanding the range of products quality-adjusted using the hedonic method and modifying the hedonic quality adjustment method for certain products as follows: (i) newly applying a time-dummy hedonic method to microprocessors (MPUs) to appropriately capture price trends amidst rapid product cycles; (ii) applying to passenger cars a hedonic method that accounts for quality differences in advanced autonomous driving technology; and (iii) applying separate hedonic models to interchangeable-lens camera bodies and lenses in order to evaluate lens performance differences in more detail. These initiatives are expected to improve the accuracy of quality adjustment in the CGPI.

Date: 2026-08-28
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