Identifying critical supply chain sources of imported inflation: evidence from Japan

Abstract

This study develops a new forward-type unit structure model that utilizes a cost-push input–output price model to identify the most vulnerable industries and supply chains in Japan affected by the recent energy price shock during 2015–2022. We observe that several commodities, including basic petrochemicals and paving materials, play a crucial role as hub sectors with large cost pass-through in the supply chain paths. Additionally, midstream industries in crucial supply chains bear cost burdens without receiving financial support. Consequently, the Japanese government should implement policies to provide financial assistance and increase investments in greener technology for the most vulnerable supply chains identified in this study, including petroleum products → petrochemicals, petroleum products → road paving, coal products → cement, coal products → iron and steel, and gas production and distribution → domestic electric power generation.