If the Bank of Japan's core price gauge is anything to go by, inflation has all but disappeared. Try telling that to anyone who pays the bills.
The general public thinks the cost of living is rising more than twice as fast as the official inflation rate, a survey of consumers by the Bank of Japan shows.
So why the gap? Naohito Abe, a professor at Hitotsubashi University, has one possible answer in an index that captures changes in prices of new products that account for almost half of goods sold at an average retail shop, and often don't show up in official data.
Together with Intage Inc. and the New Supermarket Association of Japan, he's come up with a measure that also captures the sneaky ways businesses milk consumers — by reducing the size of a product while charging the same price.
Like the central bank's main measure, Abe's gauge excludes fresh food and the effects of last year's sales-tax hike. In 2008, when BOJ Gov. Haruhiko Kuroda's favored core CPI target was last at 2 percent, the Hitotsubashi measure showed price increases of about 4 percent, Abe said.
The upshot? The BOJ's effort to drive Japan's economy out of nearly two decades of deflation is proceeding much better than the retreat in its inflation index suggests.
That could make Kuroda less inclined to hit the gas again on monetary stimulus as driving up the cost of living further while wage growth is still lagging could cause more consumers to hunker down and undermine his program.