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Micro Price Dynamics during Japan's Lost Decades


  • The authors thank the Editors of the Asian Economic Policy Review (AEPR), Tsutomu Watanabe, Kosuke Aoki, Tack Yun, and conference and seminar participants at the Asian Economic Policy Review (AEPR) Conference, CIGS and Waseda University for useful comments. The views expressed in this paper are those of the authors and do not necessarily reflect the official views of the Bank of Japan. All errors are our own.


We study micro price dynamics and their macroeconomic implications using daily scanner data from 1988 to 2013. We provide five facts. First, posted prices in Japan are ten times as flexible as those in the US scanner data. Second, regular prices are almost as flexible as those in the USA and Euro area. Third, the heterogeneity of frequency and size of price change across products is sizable and maintained throughout the sample period. Fourth, during Japan's lost decades, temporary sales have played an increasingly important role in households' consumption expenditure. Fifth, the frequency of upward regular price revisions and the frequency of sales are significantly correlated with the macroeconomic environment, in particular indicators associated with a labor market, while other components of price changes are not.