The rate which captures the amount of change in inflation over one year relative to the price level in the base year. In other words, it is the change in the price index over one year divided by the price index value in the previous year. The following formula illustrates this:
where:
For example, suppose that the values of the Japanese price index for 1996 and 1997 were 113 and 116, respectively. Then, the percentage rate of inflation is:
