ほうげつどう

This page uses Javascript. Please enable Javascript in your browser. Skip to Content Japanese English Chinese About RIETI Site Map Help Contact Discussion Papers Search Site Search Menu Research Areas Research Programs (FY2024-2028) Research Programs (FY2020-2023) Research Programs (FY2016-2019) Research Programs (FY2011-2015) Policy Research Domains (FY2006-2010) Projects Survey Fellows According to Title Alphabetical order RIETI Alumni Research/Policy Papers Discussion Papers (English) Discussion Papers (Japanese) Policy Discussion Papers (English) Policy Discussion Papers (Japanese) Technical Papers (English) Technical Papers (Japanese) Non Technical Summaries List of Articles in Journals Research Digest Discussion Papers Search Publications RIETI Books (English) RIETI Books (Japanese) History of Japan's Trade and Industry Policy Authors' Words Other Publications (English) Other Publications (Japanese) Events Symposiums Workshops BBL Seminars Archived Seminar Series Data JIP Database R-JIP Database CIP Database Industry-Specific Nominal and Real Effective Exchange Rates AMU and AMU Deviation Indicators JSTAR RIETI-TID RIETI FDI Database ICPA Project Links Articles Column Special Series Newspapers & Magazines Fellows' Works VoxEU Column From IZA Perspectives from Around the World Other Contents RIETI Report Policy Update Keizai Sangyo Journal (METI Journal) Research Areas Fellows Research/Policy Papers Publications Events Data Articles Site Map Technical Issues Coontact Discussion Papers Search Close HomeArticlesNewspapers & MagazinesFY2023 “Stealth Price Hikes” Spreading among Services Print MORIKAWA Masayuki President and CRO, RIETI Because of increasingly serious labor shortages, productivity improvement has become a challenge. What is important now is how to raise the productivity of service industries, which make up a large portion of GDP (gross domestic product). In the calculation of the rate of productivity growth, the value added used as the numerator of the formula must be expressed in real terms adjusted for the inflation rate. In principle, the price index used for that purpose should be adjusted for quality changes regardless of whether the price in question is the price of a service or a good. For example, in the case of personal computers, if prices remain constant while performance increases, prices are deemed to have declined. However, in the case of services, it is difficult to quantify changes in quality, such as the advances in medical technology. Therefore, in the long term, the rate of increase for service prices tends to be statistically overestimated, while the rate of productivity increases tends to be underestimated. Although service prices have been stable for many years, they have risen recently against the backdrop of labor shortages. Among the components of the consumer price index, service prices (excluding imputed rents of owner-occupied dwellings) have recently increased around 3% (year-on-year), the highest increase in more than 30 years, except for the periods when prices were affected by consumption tax hikes. The rate of increase for goods prices has slowed compared with some time ago, while the rate of increase for service prices has accelerated. As most services are labor-intensive, service prices are prone to the effects of an increase in nominal wages. Moreover, the recent rate of increase for service prices may have been underestimated. Regarding food products, for example, a “stealth price hike,” which refers to the practice of effectively increasing prices by reducing product volume while keeping the indicated prices unchanged, has become quite common, and this has been reflected in the price index. On the other hand, regarding services, there are some signs of decline in quality in some cases, such as a longer waiting times, poor customer service, or a slower response to complaints. However, it is difficult to make quality change adjustments that accurately reflect those factors when creating price statistics. According to a survey conducted by this author, many consumers feel that service quality has declined compared with the pre-COVID-19 period, and this tendency is conspicuous in the case of services provided by banks and other financial institutions, healthcare institutions, such as hospitals and clinics, and restaurants. In short, the true rate of increase for service prices that accounts for changes in quality may be higher than indicated by the price statistics. This is a “stealth price hike” for services. From this survey, we cannot determine the extent to which the price statistics underestimate the rate of increase for service prices, which make up around half of the consumer price index. However, the rates of real GDP growth and productivity growth calculated on the basis of the actual (quality-adjusted) rate of price increase would be lower than the statistical figures. If productivity is to be strictly measured, it is necessary to account for labor inputs by consumers. There is an increasing number of cases where consumers have to respond to a decline in service quality by contributing more time to the effort themselves. Although digitalization has been promoted as a way to deal with labor shortages, there are many computer systems that are very inconvenient from the consumer perspective because they are intended to address problems faced exclusively by the service providers. One indication of that is the fact that relatively few young people have noticed a decline in service quality, while the feeling tends to be pervasive among middle-aged and elderly people. Promoting digitalization while addressing consumer convenience is important. This matter is also related to macroeconomic policy. If the rate of increase in service prices is underestimated, it is desirable for the Bank of Japan to tighten monetary policy earlier and stronger compared to what would be required if the policy decision were to be based solely on the price statistics. If the actual (quality-adjusted) GDP growth rate is lower than the official figure announced as part of the GDP statistics, there will be a greater need for policy measures to increase supply capacity. >> Original text in Japanese * Translated by RIETI. November 30, 2023 - Published in Nihon Keizai Shimbun's "Economist 360° Perspective" January 23, 2024 Print Article(s) by this author Appropriate Pass-through of Wage Cost Increases to Selling Prices April 8, 2024［Newspapers & Magazines］ “Stealth Price Hikes” Spreading among Services January 23, 2024［Newspapers & Magazines］ Growing Uncertainties Worldwide and the Japanese Economy January 5, 2024［Priorities for the Japanese Economy in 2024 (January 2024)］ Economic Growth Bound by Regulations and Rules November 14, 2023［Newspapers & Magazines］ Are Workers with a Doctoral Degree Facing an Unfavorable Labor Market Situation? —Observations from the Employment Status Survey (2022) — October 27, 2023［RIETI Report］ Articles Column Special Series Newspapers & Magazines FY2024 FY2023 FY2022 FY2021 FY2020 FY2019 FY2018 FY2017 FY2016 FY2015 FY2014 FY2013 FY2012 FY2011 FY2010 FY2009 FY2008 FY2007 FY2006 FY2005 FY2004 FY2003 FY2002 Fellows' Works VoxEU Column From IZA Perspectives from Around the World Other Contents RIETI Report Policy Update Keizai Sangyo Journal Communications Newsletter RSS Feed Facebook X YouTube Research Areas Research Programs (FY2024-2028) Research Programs (FY2020-2023) Research Programs (FY2016-2019) Research Programs (FY2011-2015) Policy Research Domains (FY2006-2010) Projects Survey Fellows Research/Policy Papers Discussion Papers (English) Discussion Papers (Japanese) Policy Discussion Papers (English) Policy Discussion Papers (Japanese) Technical Papers (English) Technical Papers (Japanese) Non Technical Summaries List of Articles in Journals Research Digest Discussion Papers Search Publications RIETI Books (English) RIETI Books (Japanese) History of Japan's Trade and Industry Policy Authors' Words Other Publications (English) Other Publications (Japanese) Events Symposiums Workshops BBL Seminars Archived Seminar Series Data JIP Database R-JIP Database CIP Database Industry-Specific Nominal and Real Effective Exchange Rates AMU and AMU Deviation Indicators JSTAR RIETI-TID RIETI FDI Database ICPA Project Links Articles Column Special Series Newspapers & Magazines Fellows' Works VoxEU Column From IZA Perspectives from Around the World Other Contents RIETI Report Policy Update Keizai Sangyo Journal (METI Journal) About RIETI Privacy Policy Site Policy Site Map Help Contact METI Web Site Research Institute of Economy, Trade and Industry, IAA (JCN 6010005005426)JCN: Japan Corporate Number Opinions expressed or implied on this website are solely those of the author, and do not necessarily represent the views of the Research Institute of Economy, Trade and Industry (RIETI).Titles, numbers, specific names, etc. on this website are as of the date of publication. In the case of reposting material from our website, contact us beforehand. Top