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With raw material costs increasing significantly due to high commodity prices and the yen's depreciation, firms' moves to pass on the rise in costs to selling prices have become widespread. This paper examines this recent price-setting stance of firms using microdata from the Tankan surveys. The analysis finds that in the current phase, moves to raise selling prices have been spreading even among business types and firms that were cautious about changing such prices. In addition, the results suggest the possibility that, with many firms facing significant cost increases, firms' price-setting stance has been affected by a situation in which their competitors are also forced to consider raising prices.

Introduction

Japanese firms have been facing a significant rise in input costs such as of raw materials mainly due to high commodity prices and the yen's depreciation. Under these circumstances, firms' moves to pass on the rise in costs to selling prices have been spreading from business-to-business (B to B) transactions to businessto-consumer (B to C) transactions, and the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food and energy) has accelerated. For goods, prices such as of food products and daily necessities, as well as those of durable goods, which are highly influenced by the exchange rate due to a high share of imported goods, have risen significantly (Chart 1).1,2 Although the pace of increase in services prices has been relatively moderate, the rates of increase in prices have accelerated for dining-out and housework related services (e.g., services related to housing repairs and maintenance), which have a high share of material costs in their overall costs. Against this backdrop, this paper examines the recent price-setting stance of firms, focusing on consumption-related industries, which have a close relationship with the CPI. A key feature of this paper is that it uses microdata from the Bank of Japan's ShortTerm Economic Survey of Enterprises in Japan (Tankan), which continuously surveys firms' output and input prices.3 The output prices DIs for consumptionrelated industries in the Tankan have seen similar developments with the corresponding subgroups in the CPI — for example, "retailing" in the Tankan corresponds to "goods, less fresh food and energy" in the CPI (Chart 2).4 Thus, it is beneficial to analyze the characteristics of the price-setting stance of consumption-related industries using microdata from the Tankan surveys in order to examine the background to changes in the CPI.