The Bank of Japan on Thursday released a newly constructed measure of consumer inflation that strips out selected "institutional factors" and other transitory disruptions, reporting that core consumer prices rose 2.2% year-on-year in February when those special factors are excluded.
The BOJ described the new indicator as one of several core inflation measures it will use to assess underlying price pressures - that is, inflation driven by domestic demand rather than cost-push elements. The central bank said it will publish the series every month, two days after the nationwide CPI figures are announced.
The new index omits institutional elements such as changes in the sales tax rate and energy-related subsidies. By removing those influences, the BOJ's calculation produced a larger year-on-year rise than the benchmark core CPI figure recently reported by the internal affairs ministry, which stood at 1.6% for the same period.
In addition, the BOJ provided a variant known as core-core CPI - which further excludes energy prices - and said that this measure rose 2.7% excluding special factors. Under the government's calculation, that core-core series was 2.5%.
Governor Kazuo Ueda unveiled the plan to disclose the new indicator after the central bank's latest policy-setting meeting this month, and said the BOJ would also publish an updated staff estimate of Japan's neutral rate of interest. The bank characterized these disclosures as part of efforts to enhance communication around its policy decisions.
According to the BOJ, the core inflation indicators are constructed by removing transitory disturbances and institutional factors from observed consumer price movements, and are frequently used in inflation analysis. Officials and analysts say the newly released gauge is intended to show that underlying inflation remains on track to stably reach the BOJ's 2% objective, even in scenarios where headline inflation temporarily dips below that threshold.
The BOJ already issues consumer inflation estimates that exclude fresh food and fuel costs, but those series have at times been influenced by a range of government measures designed to ease household cost burdens. The central bank said the new price gauge complements existing data it uses to judge underlying inflation - reinforcing an assessment that price moves led by domestic demand are being captured more clearly.
By publishing this series monthly, the BOJ has added a regular tool to its set of indicators for monitoring whether inflation driven by domestic demand will sustain the central bank's target over the medium term.