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The CPI is an index to measure the average price movements of various goods and services purchased by households throughout the country. The index shows changes in the total amount of expenditure required to purchase the equivalent goods and services purchased by households in the base year, setting the consumption structure.
Thus, it is necessary to pay attention that the CPI intends to measure the price movements themselves, not to measure movements of living expenses with changes of varieties, qualities or quantities of goods and services resulted from the changes of households’ lifestyles or preferences.
Prices are determined by demand-supply balance if markets work well. They go up when economic activities become active and demand exceeds supply, and down in the opposite situation. For this reason, the CPI is called ‘Economic Thermometer’ and is a very important indicator to urge an economic policy properly. And it is also used as a deflator to realize other important economic indicators such as household expenditures in Family Income and Expenditure Survey (FIES) and GDP statistics. For national pension and employee’s pension, it is set in law to correct actual benefit level according to price movements and the CPI is used as an indicator to show these movements. In addition to this, the CPI is also used as the basis for the decision of financial policy in Bank of Japan. Furthermore, it is used as a reference for many purposes both in public and private sector, such as revisions of wages, house rents and utilities.
CPI items are selected in the order of the percentage of household consumption expenditure among the commodities (goods and services) purchased by households. Then, weights assigned to each item are compiled based on the percentage of household consumption expenditure from the FIES.
The price of each item is mainly obtained from the results of the monthly Retail Price Survey (RPS).
First, the price indices of each item (base year = 100) are calculated, using the average prices by surveyed municipality, then they are averaged by weights assigned to each item (the percentage of household consumption expenditure) and the indices for the subgroups, the ten major groups, and the general index are calculated.
Currently, the base year of the CPI is 2005 and it is revised every five years (base revision). The items and weights for the CPI are reviewed together with this base revision. The number of CPI items in 2005 base is 584. For new goods or services spreading rapidly and gaining consumption share to some extent, we will review the items before the next revision.
The CPI is released generally at 8:30 am on the Friday of the week including the 26th of each month. The preliminary results of Tokyo in the month and the final results of the whole country in preceding month are released. In December and March, the average index figures for the calendar year and the fiscal year(*) are released, respectively.
(*) In Japan, fiscal year starts in April and ends in March of the next year.
International Labour Office (ILO) establishes the international standards on the CPI. At the 17th International Conference of Labour Statisticians held in Geneva in December 2003, the international standards on the CPI were reviewed and the new standards were adopted as a resolution. In tandem with this, ' The Consumer Price Index Manual: Theory and Practice ', revised version of an international manual on the CPI, was completed and released on ILO homepage. The CPI in Japan is calculated along with the international standards. In some points, however, there is no ‘best’ way to calculate the CPI agreed internationally, and there are many points to discuss.
The CPI includes prices of services such as school fees, rent and eating out, which are not included in the CGPI. The share of services in weights for the CPI is nearly 50%. As the share of labor cost in prices of services is larger than that in prices of goods, prices of services tend not to move even when the prices of goods rise or decline. The goods in the CPI items are what households purchase and do not include raw materials such as crude oil, intermediate materials such as electric components nor general machinery and equipments such as construction machinery. So, even though the prices of these goods rise, consumer prices do not rise directly. They are affected only indirectly.
For these reasons, the movement of the CPI does not always correspond with that of the CGPI.
Considering only ‘Goods excluding fresh food’ in the CPI and ‘Final consumption goods’ in the CGPI to compare two indices under the similar items, they tend to move in parallel with each other.
There are mainly two reasons why the CPI and the GDP deflator move differently. First of all, the reason by the difference of the target affects this gap widely, besides the other reason such as the formula affects this gap, too.
While the CPI limits the target to the household consumption, the GDP deflator also targets business investment. As the share of IT-related goods (which quality improvement is significant) in business investment is high, the GDP deflator is highly affected by the price decline of these goods. Thus, the rate of change of the GDP deflator is lower than that of the CPI.
When prices for import goods such as petroleum products rise, they are apt to enlarge the gap between the CPI and the GDP deflator, because they lower the GDP deflator unless reflecting completely on prices of products though they contribute direct to the CPI.
Considering ‘General Index’ in the CPI and the index of ‘final consumption expenditure of households’ in the GDP deflator to compare two indices under similar items, they tend to move in parallel with each other.
The CPI and the GDP deflator are compiled by Laspeyres and Paasche formula, respectively. In general, the Paasche index, weighted by the quantity in the observation period, tends to be low and the Laspeyres index, weighted by the quantity in the base period, tends to be high. Besides, the quality improvement is regarded as the increase of the quantity. So, in Paasche formula, the share of the items which prices fell down due to the quality improvement in weights gets greater and greater. Thus, the rate of decrease of the GDP deflator, which uses the Paashe formula, is greater than that of the CPI.
In order to reduce the bias by the index calculation as much as possible, the GDP deflator is calculated by chained index, which updates the base year annually.
Similarly, chained index is complied for reference in the CPI.
Although TV products vary from small size ones for the personal use to large size ones for family use, the average purchase price of TVs obtained from the FIES is calculated without considering the difference of the quality in each product purchased by consumers. In contrast, the CPI measures the price change of products with the equal quality. In the case of replacement of the survey specification, price change resulted from the quality change is excluded.
As shown in the Figure 1, the average purchase price per unit had been relatively stable before the collapse of the bubble economy. It indicates that new products with higher qualities had tended to be sold within a constant price range before the collapse of the bubble economy. However, the average purchase price per unit has tended to decline since the collapse of the bubble economy. The similar tendencies were found in other electrical appliances also. This phenomenon was resulted from the keen price competition named "the price destruction". In 2004 and 2005, the average purchase price rose sharply, because purchase of TV sets (LCD) with comparatively expensive prices has increased according to the spread of them.
On the other hand, the price index for TVs has declined continuously even before the collapse of the bubble economy because the CPI shows a price change of the same quality.
As for foods, changes of the average purchase price and the CPI may possibly differ due to changes in consumers' preferences.
For example, the average purchase price of milk per liter declines lower than the price index for fresh milk (sold in stores) due to the increase of the low fat milk, which tends to be less expensive.
In contrast, the average purchase price of soy sauce per 100 milliliter rises higher than the price index for soy sauce, due to the increase of "MARUDAIZU soy sauce" (made from whole soybeans), which tends to be more expensive.
Thus, features of items characterize differences between the average purchase price and the CPI. In general, in items such as TVs whose qualities are continuously improved by the technical innovations, price indices tend to fall faster than the average purchase prices while, in items such as soy sauce, which consumers tend to purchase more expensive products in a boom, and tend to purchase less expensive products in depression, the average purchase prices tend to change more wildly than the price indices.
The items adopted in the CPI are determined every five years by selecting the goods and services that have a certain share of consumption expenditures based on the results of the FIES. In case of the 2005 revision, items for information, such as TV sets (LCD) and DVD recorders, and other items were newly added. For new goods or services spreading rapidly and gaining consumption share to some extent, we will review the items before the next revision.
To calculate the CPI, goods and services are first grouped into 584 items, and a weight assigned to each item is computed as proportional to the amount of expenditure on each item in the base year. Prices for each item are collected monthly. Goods and services are classified so that each item encompasses similar products in terms of usage, function, etc., and prices within each item are expected to move parallel with each other for long spells. For example, "milk sold in stores" and "milk delivered to households" are identical in a sense that both of them are milk. However, as their price changes differ due to the additive delivery service, they are split up into two separate items.
Ideally, to get the exact price movement within an item, prices and sales of all products within an item should be collected at survey outlets every month, and a Fisher (ideal) index formula should be applied. However, it is not feasible to collect prices and sales of all products at outlets every month. Thus, in the compilation of the CPI, items are set up as stated above, and a representative specification is selected as the survey specification in order to approximate price movement within each item.
Supposing a number of specifications were priced, and prices were averaged with fixed weights (e.g., proportional to sales at the base period), it is highly possible to cause bias due to the strong substitution effects among products because of changes of price ratios and substantial sales changes by each specification.
(Note)
"Items" and "Specifications" in the CPI: There are numerous goods and services purchased by consumers. In the CPI, these goods and services are grouped into 584
"items" according to usage, function and similarity in price movement, so that each "item" accounts for more than a certain percentage (1/10,000) of the total consumption based on the results of the FIES.
In general, each item encompasses an enormous variety of "specifications" in terms of quality, volume, container and other characteristics. In the compilation of the CPI, a specification is defined as "survey specification" to represent the item, and its monthly prices are collected. Therefore, "specification" in the CPI is designated to restrict the sphere of products to be priced to homogenous limits by specifying quality, size and other characteristics.
Furthermore, in practice, products to be priced are named in many cases. At each survey outlet, a price collector picks up one of the nominated products which has the largest sales. For example, in the case of item "Yogurt", survey specification is "plain yogurt with net weight 500g in plastic container", and the most popular one at each outlet among products that meet this survey specification is selected. Then, the same product is priced continuously unless it is out.
Survey specifications (determined by each item for actual pricing) are reviewed continuously, and if not available enough or losing popularity in the market, such specifications are replaced with more representative ones twice a year. To cope with rapid changes of the commodities (e.g., stop manufacturing the survey specifications and release the new products), however, we change the survey specifications during the periodical replacing period. Such replacement of survey specifications numbers about 30 cases each year. As a result, we follow the prices of survey specification representing each item.
The article is likely to cite a guestimate in a paper written by an official of the Bank of Japan in 1998, in which this official expressed his personal view. However, his guestimate is not well grounded. For example, he supposed that the same biases found in the US CPI also exist in Japanese CPI, which is quite different from US CPI, without any verification.
In this connection, the Bank of Japan clarified its stance that his paper expressed his personal views, and did not state its official views.
The Statistics Bureau of Japan will continue to study the issues relating to qualities of the CPI, which attract so much concern these days.
Especially, the CPI has a character to be higher as time passes from the base year since it is calculated with Laspeyres arithmetic formula that uses fixed weights and items.
The change over the year of ‘General Index” or ‘General, excluding fresh food’ on the 2000 base was 0.4-0.6 point higher than newly revised one on the 2005 base in 2006, six years later after the previous base year.
In Japan, besides the official Laspeyres index compiled using fixed base weights, a chained Laspeyres index - i.e. year to year chaining of average price ratios of each year to the previous year based on the consumption pattern in the previous year - is compiled and released as a reference to measure effects of changes in the consumption pattern. We have released the chained Laspeyres index annually since 1975, but we will release this index monthly to reflect changes in the consumption pattern timely. In addition to the chained Laspeyres index, another index named "midpoint-year basket index" has been released for the purpose of reflecting changes in the consumption pattern including substitution effects more accurately.
Most indices, price indices such as the CPI and the CGPI, and quantity indices such as the Index of Industrial Production and the Transportation Index, are revised every five years in Japan.
The CPI measures the average price change of goods and services purchased by consumers from the base year. Since goods and services purchased by consumers change over time as new commodities emerge, consumer preferences change, and so on, the index would become not to reflect the actual average change properly if the base year were fixed for a long period. Therefore, the base is periodically revised. The base revision contains update of weights assigned to items, addition of new items and abolition of some existed items, and so on, in order to reflect consumption pattern in the new base year. In Japan, the latest year ending with 0 or 5 is designated as the base year in principle in the same way as other price indices such as the CGPI, the Index of Industrial Production and the Transportation Index, following the 1981 recommendation of the Statistics Council. Many other countries also revise their CPI every five years or so.
For new goods or services spreading rapidly and gaining consumption share to some extent, we will review the items before the next revision.
Considering contributions to the difference by the revision, -0.5, the difference between the bases of the change over the year of the general in July 2006, is mainly composed of -0.16 by “Transportation & communication” group and -0.18 by “Reading & recreation” group.
Main factors for the difference between the bases is the followings.
The weight of “Mobile telephone charges” in “Transportation & communication” group was changed from 74 to 208 per 10,000 on the new base, three times as large as one on the old base, while the use by households shifted to discounted plans.
In “Reading and recreation” group, added items related to information?such as “TV sets (LCD)” with rapid dropping prices and contributed to widen the difference.
The index for “Personal computers (notes),” whose price has dropped down dynamically, was about 16 on the old base. With reset to 100 on the new base, it contributed to widen the difference. (100/16 =6)
Monthly statistics, like the CPI, show similar changes every year by seasonal factors (e.g., prices of clothes are high at the beginning of the season and low at the end for sale). These are called seasonal changes.
Seasonally adjusted indices excluding these seasonal changes are released in eight series, ‘General’, ’General, excluding fresh food’, ‘General, excluding imputed rent’, ‘General, excluding imputed rent and fresh food’, ‘General, excluding food(excluding alcoholic beverages) and energy’, ‘ Goods’, ‘Goods, excluding fresh food’ and ‘Semi-durable goods’.
Since seasonally adjusted index is adjusted based on average seasonal changes calculated by the past indices, price changes in particular months may affect other months (e.g., school fees, medical treatment). Thus, seasonally adjusted index may change in the months when no price changes actually occur.
On the other hand, change over the year, comparison of the current index with that of the same month in the previous year is also useful to eliminate the seasonality. Change over the year doesn’t change for one year as long as prices do not change. Thus, in the CPI, change over the year is often used to see the price trend.
As for fresh food which prices fluctuate greatly, and electricity and gas which prices change only in the price revision month, change from the previous month, comparison of the current index with that of the previous month, seems to be close to the real feeling of consumers. Thus, change from the previous month without a seasonal adjustment is also released.
As the purchase of housing and land is not a consumption expenditure but acquirement of property, it is not included in the CPI. But households living in owned houses actually receive services from their houses. And it originally comes from the purchase of their housing and land, and many owners are repaying their housing loan. Thus, the problem, how to measure the housing cost of owner-occupied houses, arises.
If owned houses were rented, owners have to pay rents. So, from the rents of rented houses, a value which is equivalent to the services from owned houses could be estimated, and this value can be considered as a housing cost. Based on this concept, assuming that owned houses were rented, the rent paid to owner-occupied houses is included in the CPI (called ‘imputed rent’).
In calculation, weights based on the imputed rent of owner-occupied houses by National Survey of Family Income and Expenditure are calculated by their structure and size. And the ‘house rent, private’ by RPS is substituted for the monthly price change of the imputed rent. The concept of imputed rent is not only used in the CPI, but also used in System of National Accounts (93SNA) in many advanced countries.
Since the CPI intends to measure pure price changes, prices of same commodities (goods and services) are continuously followed in general. However, when the survey specifications are not representative of the price changes of the items since they are not available enough in the market or not manufactured any more because of the emergence of new products, survey specifications must be replaced. In this case, the difference in qualities such as volume, function and characteristics between new and old commodities should be removed from price indices. This is called quality adjustment.
To calculate the CPI, the quality difference is adjusted by selecting appropriate method, such as overlap method, adjustment by quantity ratio method, regression method, option cost method, class mean imputation method, and direct comparison method.
As for personal computers and digital cameras, whose quality improvement is striking and duration of each product in the market is very short, the price changes after quality adjustment are directly estimated by the Hedonic method using POS information. In addition, the quality adjustment of PC printers is performed by the Hedonic method at the time of survey specification changes.
(POS information)
This is the information on selling prices and quantities with characteristics of each product collected by POS (Point of Sales) system of retail outlets.
POS information used in the CPI is on selling prices, quantities and characteristics of all products sold in major outlets of electric appliances for home and personal computer shops in our country (about 3,400 outlets).
19 What is the Hedonic method?
The Hedonic method is one of the methods used for quality adjustment. Assuming the quality of each product is decomposed into several characteristics (or performance) and the price of the product is decided depending on its performance, this method tries to measure, quantitatively, price difference caused by quality difference by multiple regression analysis, which relates product price and characteristics (e.g., the size of screen, CPU clock frequency, HDD memory capacity in case of PCs).
As for personal computers and digital cameras, whose quality improvement is striking and duration of each product in the market is very short, the price change after quality adjustment are directly estimated by the Hedonic method to calculate the Consumer Price Indices. POS information is used in applying the Hedonic method because much information on prices, quantities and characteristics is necessary for more objective and reliable multiple regression analysis.
In addition, at the time of a change in the survey specification of PC Printers, it is contemplated to apply the Hedonic method as an option for the quality adjustment method. When the survey specification was changed in every October from 2003 to 2007, the linking was made by a link coefficient calculated by the Hedonic method. However, the Hedonic method was not applied in 2008, but the linking was made by direct comparison.
In applying the Hedonic method, we verified the goodness of applying of the regression model, and significance and consistency of the explanatory variables. In addition to this, we compared the index calculated by the Hedonic method with the index calculated by matched model method (this calculates the change in price of the commodity which has been sold in current month and previous month by the Fisher formula with prices and quantities of the commodity in current month and previous month). Consequently, quality adjustment estimated by the Hedonic method is not excessive about personal computers because there is little gap between these two indices calculated by each method.
[Reference] (in Japanese only)
"About the Hedonic method (PDF: 643KB)" by Makoto Shimizu & Keiko Nagai, Publicized in the monthly magazine Statistics - November 2006, Japan Statistical Association
The Hedonic method calculates the correlation between the price of a product and its characteristics (performance) statistically by using various sales data (POS information). When we see how each element of performance affects a product's price, we cannot necessarily say that the price is reduced by half even if the product's performance has been doubled.
From the result of calculations publicized in the "Annual Report on the Consumer Price Index - 2007", a correlation can be estimated such as "when increasing the storage capacity of a personal computer's HDD by 10 GB, the main unit price of the personal computer rises by 2.9%". Accordingly, "when a new personal computer model offers HDD memory capacity increased by 10 GB compared to its preceding model, a comparison of prices between both models is generally made after deducting 2.9% from the actual main unit price of the new model." For instance, when HDD memory capacity has been upgraded from 80 GB to 160 GB, RAM capacity from 512 MB to 1 GB, and the CPU from a single-core to dual-core unit, prices will be compared after deducting an upgrading value of 36%.
In other words, the quality adjustment for upgrading performance cannot be estimated by a simple method, though it depends on the definition of performance.
At that time (October 2008), there was no significant difference in performance between the new model subject to the survey and the previous model. (The prescribed performance of the product to be surveyed had not been changed.) Therefore, since no special quality adjustment such as the link coefficient was necessary, direct linking was made without applying the Hedonic method.
When the subject of the survey was changed from an old model (adopted from October 2006 to September 2007) to a new model last time (in October 2008), the Hedonic method was applied. At that time, although the performance of the new model had been slightly improved compared to the old model, the link coefficient involved in the change of models was about 1, thereby approximating that obtained in the direct linking method and making the extent of contribution to the ratio in the same month of the previous year of the general indices 0.00 by both methods, indicating virtually no difference. Since the difference in quality of the old and new models at this time is still smaller than the previous time, it is considered practically adequate to use the direct linking method again. In other words, if the quality adjustment was made by applying the Hedonic method on the supposition that the previous model was changed to a new model, there would be almost no difference in the value posed by the variable constituting the regression formula, consequently leading to virtually the same result as that obtained by the direct linking method. Therefore, we did not apply the Hedonic method.
Incidentally, we will contemplate the optional use of the Hedonic method in case performance has been remarkably enhanced when changing the survey specifications of PC printers in the future.
Strictly speaking, the indices before and after the revision have different contents since the adopted items and weights for calculation are renewed in the revision. However, we link new and old indices in the revision to analyze long-term price movements in time series.
New and old indices are linked by converting old-base indices by the ratio of the old annual average indices to the new indices (new-base index = 100). This link is processed for each item individually and upper level indices by the linked indices are not recalculated. The rates of change (from the previous month, over the year, from the previous year and from the previous fiscal year) are the figures calculated directly by the indices released on each base, not recalculated by the linked indices. In each base year, the change from the previous month in January, over the year from January to December, from the previous year, and from the previous fiscal year, are the figures calculated by the indices of the old base.
Since prescribing the specifications of 59 items including airline fares, electricity, mobile telephone charges, etc. is difficult due to their diversified charging systems and varied prices, the monthly consumer price indices are calculated by prescribed model formulas using the prices obtained by the Retail Price Survey and other data obtained from routine statistics work, etc.
The method of calculating the indices by model formulas is publicized in the "2005-Base Explanation of the Consumer Price Index", p.43 -70: "Appendix 2 Special calculation of the prices in the observation period and the price indices for some items (PDF: 1762KB)".
Q22 How do you calculate mobile telephone charges?
The consumer price indices of mobile telephone charges are calculated based on the weighted average prices of the three major carriers serving many subscribers (NTT docomo, KDDI and SoftBank) taken with weights of the numbers of subscribed telephones for each carrier and each system (of the 2nd and 3rd generations)* that are updated annually.
The various types of discount plans, etc. are treated as follows:
Since we currently cannot obtain information on the number of subscribers for each charge plan of each carrier and the situation regarding changes made to/from those plans, we compare charge plans that do not impose restrictions on contract period, etc. regardless of the numbers of subscribers, and adopt the most inexpensive plan available to consumers from among those plans.
"Daredemo-wari" (introduced on September 1, 2007), "Hitoridemo-wari 50" (introduced on August 22, 2007), "New Jibun-waribiki 50" (introduced on September 1, 2007) and "Jibun-waribiki 50" (introduced on September 1, 2007) are service plans offering maximum discounts on monthly base charges based on the condition of a two-year uninterrupted subscription, regardless of the length of subscription period in the past. "Fami-wari MAX50" (introduced on August 22, 2007) and "Family-waribiki MAX50" (introduced on September 1, 2007) are plans offering a 50% discount on monthly base charges for family members contracted for such discount based on the condition of a two-year uninterrupted subscription, regardless of the length of subscription period in the past.
Since we consider that discounts with a restrictive condition and discounts for family members may not be simply reflected in consumer price indices based on the idea described in 22-1, we also have not adopted these services at this time.
Incidentally, as of August 2007, KDDI offers "MY-wari" (which automatically shifted to "Daredemo-wari" in September 2007) and SoftBank offers "Jibun-waribiki" (which automatically shifted to "New Jibun-waribiki" in September 2007), both of which prescribe the condition of two-year uninterrupted subscription, but we have not adopted these plans in calculating consumer price indices.
The "au Purchase Program - Simple course" and "Simple Orange" (both introduced on November 12, 2007) and the "Blue Plan Value" (introduced on December 5, 2007) can be applied for based on the condition of purchasing a cellular phone for a new subscription contract or changing the phone mode, etc., and the "Value Course" (introduced on Novermber 26, 2007) is similarly conditioned on purchasing subject cellular phone model to be released after the 905i series for a new subscription contract or changing the phone model, etc.; the existing subscribers of other plans cannot change to these plans without any restrictive condition.
For the above-mentioned reasons, these plans are not deemed subject to consideration regarding the most inexpensive plan for the time being. Therefore, the most inexpensive plan of those which have been provided thus far (i.e., KDDI's plans provided until November 11, 2007, NTT docomo's plans other than "Value Course" and "Basic Course", and SoftBank's plans other than the "Simple Orange" and "Blue Plan Value") will be used for calculating the index.
Since we currently cannot accurately estimate the number of subscribers who will change to the "au Purchase Program - Simple course", "Value Course", "Simple Orange" or "Blue Plan Value", and also because a new burden of purchasing new cellular phone sets will be imposed on existing subscribers by changing to these plans, we will continue to calculate the index with plans that have been provided in the past.
Should these plans become widely used in the future where circumstances make available more detailed information on the number of subscribers to these services, etc. and we can be assured that the "au Purchase Program - Simple course", "Value Course", "Simple Orange" and "Blue Plan Value" plans have taken root, it will be possible to subject these plans to consideration regarding the most inexpensive plan.
These plans would be the same in the case of a new contract or change to a different model of phone set, but existing subscribers can change to the "White Plan" or "Double White" plan free from any restrictive conditions. In contrast, the "au Purchase Program - Simple course", "Value Course", "Simple Orange" and "Blue Plan Value" differ in that they would impose a new burden on customers having to purchase new cellular phone sets.
Since the "CDMA1X WIN" charge plan and "Orange Plan (WX)" are considered generic plans without any restrictive conditions, both will be subject to consideration regarding the most inexpensive plan.
In most cases concerning the Retail Price Survey, the survey specifications of the following month are publicly disclosed toward the end of each month (releasing date). We will handle the mobile telephone charge plans and services in the same manner, and make the information available on the Internet Web site.
However, this may not be possible in case of any particular reason, such as a new service being started with only a short notice or much time needed to consider its adoption.
There are also some cases where we cannot disclose basic data on certain items since we are permitted to use nonpublic corporate information in calculating their indices by using model formulas.
The prices of mobile telephone charges are to be surveyed on Friday of the week that includes the 12th day of every moth.
The starting date of applying a new plan may be a different day depending on the account-closing date for users. NTT docomo and KDDI close the accounts for all users on the last day of every month, but SoftBank has three patterns of closing dates (i.e., the 10th, 20th or last day of every month), and therefore, the starting date of applying a new service differs depending on the user. In this case, we compare the earliest starting dates of applying a new plan among the three patterns with the survey date for prices, and if application of the new plan starts prior to the survey date, the plan is to be adopted for calculating the price indices of that month.
(Example 1) When the starting date of application is the 11th (of the current month) and the survey date is the 13th (of the current month):
Since we apply the method of calculating the consumer price indices as the weighted arithmetic mean with a fixed basket in the base period preceding the observation period (Laspeyres method), we do not plan to change any weights or model formulas in the 2005-base indices. Should such a plan be established where the price of cellular phone sets and telephone charges are separate, we shall consider reviewing the model formulas, etc.
Incidentally, in order to reflect changes in the consumption structure of households in the indices, we will annually update the weights used in calculating the consumer price indices by the Laspeyres' Chain Index Method (reference indices).
Both the "Ahead-of-schedule experiment in the society" and "Comprehensive emergency countermeasures" will be reflected in the indices starting with their results in October 2008.
At this time, the national expressway tolls will be discounted for vehicles equipped with an ETC unit at a prescribed rate that varies depending on the hour of the day, and day of the week. (For detailed information on the reduction of expressway tolls, visit the Ministry of Land and Transportation Web site.) (in Japanese only)
Primarily, the toll rates for standard-sized cars to use the distance-based-rate sections comprising the ordinary sections [local districts] and special sections [large city districts (Tokyo, Osaka and the surrounding areas)], and the flat-rate sections of expressways effective as of the date of conducting the Retail Price Survey are applied to calculate the indices. In considering the discounts for cars equipped with an onboard ETC unit, the toll rates are obtained by averaging the ordinary and ETC-discounted toll rates by weight of the ETC utilization factor (fixed at the mean rate of 2005). As for the said ETC-discounted rates, reduced normal toll rates are obtained by averaging the rates of discounts by hours of the day by weight of traffic volume (common to weekdays and holidays, and to all road sections; fixed at the 2005 figures) using available information, and further averaging the result by weight of the numbers of weekdays and holidays (deemed 5 to 2). By taking this process, the rates of ETC discounts that vary depending on the hour of the day and day of the week are reflected in the indices as in the past.
The method of calculating the indices are publicized in the "2005-Base Explanation of the Consumer Price Index" (p.56), "Appendix 2 Special calculation of the prices in the observation period and the price indices for some items (PDF: 1762KB)". Moreover, please refer to the following supplementary explanation:
==Supplementary explanation (For the sake of simplification, the classifications of ordinary/special sections and the flat rate/distance-based toll rates are omitted.)==
(1) Average the rate of ETC discount for every hour of the day by weight of traffic volume (common to weekdays and holidays) to obtain the mean rate of discount of weekdays and holidays.
Recently, the so-called "Core index" and "Core-core index" have apparently attracted people's attention as indices used to determine the factors of trends in the prices of goods. However, such indices are merely the popular names of indices that have been officially laid open or processed and calculated by users, and not official names.
As an index used to determine the underlying trend in the prices of goods and services, the index of "General, excluding Fresh food" whose prices often widely fluctuate depending on the weather is sometimes called the "Core index".
Similarly, as something equivalent to an index emphasized in the USA and other foreign countries, the "General index" representing an index of "General, excluding food (excluding alcoholic beverages) and energy" is used, and such index is sometimes called the "USA-type core index" or the "Core-core index". In addition, the Cabinet Office calculates the "General, excluding the elements of fresh food, petroleum products and other peculiar factors" based on the indices of various items and reports made in the Monthly Economic Report, etc., and some users call that index the "Core-core index". It should be noted, however, that the items covered by the latter index are different from those covered by the index of "General, excluding foods (excluding alcoholic beverages) and energy".
(For reference)
