Page 29 - Invited Paper Session (IPS) - Volume 2

IPS178 Kuniko M.
Following the experimental survey, the Bank has begun a full-scale survey
of the “Wholesale Services Price Index (WSPI),” from the 2015 base SPPI. This
also responds to the increasing need for more accurate GDP statistics in Japan
through the improvement of the service sector’s statistical development.
The wholesale trade sector is one of the most significant sectors in the
Japanese economy. Wholesale products come to about 437 trillion yen (2016,
Economic Census), and the nominal value added to the whole economy is 8.4%
(2015, GDP statistics). Thus wholesale services should be in the scope of the
SPPI. However, due to the difficulty in surveying wholesale service prices, up
until the most recent SPPI revision this time, the Bank has regarded them as
“uncovered services” in the SPPI, and incorporating them into the SPPI has
been an outstanding issue. In addition to measuring the price trends of
wholesale services, there are several other benefits which the WSPI will yield,
such as: (a) accurate deflators in GDP statistics, (b) enabling the analysis of
productivity of the wholesale trade sector, (c) enabling assessment of
economic conditions and analysis of the price setting behavior of wholesalers.
It is because of these benefits that economists and external statistics
authorities such as the Cabinet Office have called for the creation of the WSPI
for many years.
The WSPI has just been adapted to the GDP statistics as its deflators from
the quarterly estimates (first preliminary estimates) for April-June 2019,
published in August 2019. In the GDP statistics, the nominal output of the
wholesale trade sector is measured by the nominal amount of wholesale
margin (the difference between value of total sales and that of total purchase),
and in order to calculate real output of wholesale trade sector, it is necessary
to divide the nominal margin by a “wholesale deflator.” Since the wholesale
trade sector consists of large amount of nominal GDP as mentioned above, an
accurate deflator for the wholesale trade sector would be indispensable for
the precise measurement of real GDP. Previously, in Japan’s GDP statistics, the
wholesale deflator was simply estimated using price data of products
purchased by wholesalers (i.e. the Producers Price Index) as a substitute for
the corresponding service prices. This method, is however, often mentioned
as a less appropriate method because of the strong assumption that price
trends of wholesale services are identical to price trends of corresponding
goods transacted by wholesalers. In contrast, in the U.S. and Canada, the price
statistics divisions compile quality-adjusted price indexes of wholesale services
by surveying prices with constant quality from a large number of companies,
and the indexes are used to calculate wholesale deflator in their GDP statistics.
In other countries such as the United Kingdom and Germany, where WSPI
does not exist, real output of the wholesale trade sector is estimated using the
assumption that the volume of margins follows the volume of sales (measured
by deflating nominal sales using the sales price index). As this assumption is

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