Economics & Finance / Macroeconomics / Inflation & Monetary Policy

Why Japan’s Oil Price Pass-Through Dropped 78%: The Shocking Truth Behind Cheap Oil

Pass-Through of Oil Prices to Japanese Domestic Prices

Etsuro Shioji, Taisuke Uchino

Think oil prices drive Japan’s inflation? Think again. This video breaks down a 2010 study by Etsuro Shioji and Taisuke Uchino, revealing how the pass-through of oil prices to Japanese domestic prices collapsed by 78-89% from 1980 to 2000. The real culprit isn’t technology or efficiency—it’s the relative price of oil itself. When oil got cheap, it vanished from cost structures, making prices less sensitive. Plus, Japan’s quirky tax system (fixed per liter, not percentage) slashed gasoline pass-through. And after 2000, when oil surged, actual pass-through barely budged—thanks to policy, labor market shifts, and central bank credibility. This isn’t just about Japan; it’s a global lesson on how price transmission works (or doesn’t). Watch to understand the hidden forces that keep your gas bill and grocery costs stubbornly disconnected from global oil swings.