Why is the Rate of Decline in the GDP Deflator So Large? -- Exploring the background against the discrepancy from the Consumer Price Index--

The year-on-year rate of decline in the Consumer Price Index (CPI)--excluding fresh food, since it fluctuates significantly--narrowed to -0.4 percent in April 2003. Meanwhile, the year-on-year change of the GDP deflator for the first quarter of 2003 dropped to its lowest record of -3.5 percent. Even from a longer perspective, the CPI and GDP deflator show different movements; one's assessment of deflation differs substantially from the other's, depending on which index is being observed. This paper examines how the movements of these two price indices actually differ and what brings about those differences.