What Is the Domestic Corporate Goods Price Index Japan?

The Domestic Corporate Goods Price Index Japan measures the prices of firm-created goods created at the producer and wholesaler level in Japan. The Domestic Corporate Goods Price Index (CGPI) tracks changes in supply-side prices within the Japanese economy. For the year 2000 and earlier, the CGPI was previously known as the Wholesale Price Index (WPI). 

Key Takeaway

  • The Domestic Corporate Goods Price Index is an index of manufactured goods producer prices in Japan.
  • The monthly CGPI is closely watched by businesses, investors, and public officials in Japan, and it has an impact on equity, commodity, and forex markets.
  • The CGPI is used to track supply and demand conditions, indicate the health of the Japanese economy, gauge the effect of Bank of Japan monetary policy as a price deflator for economic data, and for contract price escalation.

Understanding the Domestic Corporate Goods Price Index Japan

The Bank of Japan (BoJ) releases the Domestic Corporate Goods Price Index Japan. The CGPI is published on the eighth business day of each month and typically a large effect on the equities, commodities, and forex markets occurs following its release. Investors, business leaders, and public policy makers closely watch developments in the CGPI. The headline figures are the percentage change in the overall domestic CGPI month over month, while the report itself publishes separate indices for each commodity category. Along with the CGPI, the BoJ has numerous economic responsibilities, including the issuing and handling of treasury securities, implementing monetary policy, maintaining the stability of the Japanese financial system, and providing settling and clearing services. The BoJ also issues the Japanese yen.

Changes in the CGPI often precede changes in the overall Consumer Price Index, as input costs are passed on to the the retail sales prices of consumer goods. Thus, a large increase in the domestic CGPI will lead to a large increase in the overall consumer price index. The CGPI is roughly the equivalent of the U.S. Producer Price Index. It includes three main groups of prices, a Producer Price Index, an Export Price Index, and an Import Price Index.

The purposes of the index include to indicate trends in supply and demand, to assess economic developments, and to gauge the impact of the BoJ's monetary policy. Increases in the rate of inflation reflected in the CGPI can indicate rising demand conditions, supply constraints, or both. Increasing price inflation can be taken a positive sign that expansionary monetary policy is effectively stimulating the economy, and low or negative rates can serve as warning signs that the economy is at risk of sliding into a recession. The CGPI (and its predecessor the WPI) is one indicator that can be used to understand the period of deflation and economic stagnation known as Japan's Lost Decade.

Also, the CGPI is used as a price deflator to calculate real values goods and services by removing the effects of price changes and as a reference index for contract escalation and price-setting in the Japanese economy. Deflating prices allows comparisons over time that reflect actual amounts of economic goods and services. Using a price index like the CGPI to help determine contract prices and wages can reduce negotiation and transactions costs for businesses. 

The CGPI is currently indexed to the base year 2015, so the raw index number represents the percent difference between the current month prices and average prices for the calendar year 2015. The monthly CGPI then reports the month-to-month percent change in the raw index.