Dynamics of commodity price fluctuations in Japan

Abstract

Deflation is a most important economic problem having been faced by Japan, and also developed countries in Europe, under zero interest rate. How individual prices influence each other, namely the dynamics of a large number of commodity prices and fluctuations plays a crucial role there. By using hundreds of individual commodities and their prices that comprise the import price, corporate goods price and consumer price indices, we show that price fluctuations have frequencies and synchronizations specific to space and time. Space means industrial sectors for the commodities and how they are located in the supplier-customer network. Temporal structure includes background movement due to deflation, inflation and exogenous shocks such as VAT (consumption tax) rate changes, the Lehman shock and so forth, but also endogenous shocks or mutual influences among the commodities.