The Bank of Japan published a working paper estimating demand function parameters for a wide range of consumer products in Japan over the past three decades using granular point-of-sale data and machine learning. The study finds that while aggregate median price elasticity and markups were broadly stable over the long term, recent years show a modest fall in the absolute value of median price elasticity alongside an increase in markups. Demand curvature rose until the mid-2010s and then declined. Panel results show statistically significant relationships between the estimated demand parameters and factors including labour force participation and market concentration, with the rise in female labour force participation identified as a key driver of the recent decline in both absolute price elasticity and demand curvature, consistent with diminished consumer price sensitivity. The paper is circulated to stimulate discussion and does not necessarily reflect the official views of the Bank of Japan.
Bank of Japan 2026-02-12
Bank of Japan working paper links reduced consumer price sensitivity to higher markups and rising female labour force participation
The Bank of Japan's working paper analyzes demand function parameters for consumer products over three decades, revealing stable aggregate median price elasticity and markups, but a recent decline in price elasticity and rise in markups. The study highlights the impact of increased female labor force participation on reduced price sensitivity and demand curvature, with findings intended to stimulate discussion rather than represent official views.