Administered Prices in Japan: Institutional Comparisons with Europe and the United States

Kohei Shintani, Yoshiyuki Kurachi, Shinichi Nishioka and Takashi Okamoto
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Shinichi Nishioka: Bank of Japan
Takashi Okamoto: Bank of Japan

No 16-E-9, Bank of Japan Review Series from Bank of Japan

Abstract: Although the underlying trend in consumer prices has been rising steadily in recent years, administered prices in Japan have stayed more or less flat. In contrast, administered prices in Europe and the United States have consistently moved upward. Differences in the institutional systems of administered prices can be pointed out as one reason for this sharp contrast. Since the 1980s, European countries and the United States have taken measures to (i) enhance management discipline of publicly owned businesses, and (ii) create independent regulatory commissions and enhance independence from the government mainly in terms of price-setting. As a result, administered prices have been set in accordance with labor and investment costs. In the case of Japan, on the other hand, the government has been heavily and directly involved in the price-setting process, and government subsidies have been granted to many public enterprises. This mechanism may act to affect administered prices in our country.

Date: 2016-07-27
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