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Firms' Recent Price-Setting Behavior for Services Prices in the Consumer Prices

Author

Listed:
  • Tatsuya Ozaki

    (Bank of Japan)

  • Tomoyuki Yagi

    (Bank of Japan)

  • Akihito Yoshii

    (Bank of Japan)

Abstract

In the consumer prices for services, labor costs account for a high share of output prices. With the strengthening linkage between wages and prices, services prices are an important factor for increases in underlying CPI inflation. Services prices in Japan remained at around 0 percent on a year-on-year basis and extremely sticky. Through an analysis of firms' recent behavior, it is clear that their price-setting behavior has begun to change, as shown by a rapid increase in the rate of wage increases in the annual spring labor-management wage negotiations for two consecutive years and the "beginning-of-the-period price hikes" seen in many services items in spring 2024. Going forward, it is important to continue to examine from a broad perspective whether these changes in firms' price-setting behavior will spread further and whether underlying inflation will rise steadily.

Suggested Citation

  • Tatsuya Ozaki & Tomoyuki Yagi & Akihito Yoshii, 2024. "Firms' Recent Price-Setting Behavior for Services Prices in the Consumer Prices," Bank of Japan Review Series 24-E-10, Bank of Japan.
    • Handle: RePEc:boj:bojrev:rev24e10
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    File URL: https://www.boj.or.jp/en/research/wps_rev/rev_2024/data/rev24e10.pdf
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    More about this item

    Keywords

    Consumer prices; Wage; Pass-Through; Cost structure; Lasso; Probit; Time-varying parameter VAR;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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