Calculating the amount lost to inflation
The amount on my pension notice has increased, but life isn't any easier. How much value is being lost?
When to use When you receive your pension amount notice. When you receive a notice of your fixed deposit's maturity. When you see news of price hikes.
Face value and what it can buy
The face value amount is called the nominal value, and the amount after subtracting for inflation is called the real value. If prices rise by r percent per year, what the same face value can buy in n years will be today's value of 1 ÷ (1 + r/100) to the power of n. In 2025, Japan's Consumer Price Index (General) was a 3.2 percent increase from the previous year.
Formula
Real value = Face value ÷ (1 + inflation rate/100) to the power of number of years. Loss in value = Face value - Real value. If inflation is 2 percent per year, a face value of 100 becomes 82 in 10 years (100 ÷ 1.02 to the power of 10).
How to use
For face value, enter your annual pension amount or fixed deposit amount. For the inflation rate, enter the consumer price increase rate for the most recent year. Since the rate changes every year, this calculation is a hypothetical one based on "if that rate were to continue." It is not a prediction of future rates.
Where to check
Japan's Consumer Price Index is published monthly by the Statistics Bureau of the Ministry of Internal Affairs and Communications. In the U.S., the Bureau of Labor Statistics, and in the Eurozone, Eurostat, publish indices of the same form. If you substitute the rate, the formula is the same.
Try with your own numbers
Change the values to recalculate instantly. The formula is provided below. For the source of the values, see the reference page.
Input value
Output value
Formula Dividing the face value by "1 + inflation rate" to the power of the number of years gives the amount converted to present value. The difference between the face value and that amount is the loss in value.
In other countries
The principle is common. The CPI from the U.S. Bureau of Labor Statistics and the Eurozone's HICP (approx. 700 items) are also indices of the same form, comparing the price of a basket of goods purchased by households with the previous year. You can calculate the loss in value with the same formula by substituting the rate. Both the Bank of Japan and the European Central Bank have set a 2 percent inflation target.
Source (Archive)
- 2020-Base Consumer Price Index, Japan, 2025 (Reiwa 7) Average.Statistics Bureau, Ministry of Internal Affairs and Communications
- Consumer Price Index (CPI).Statistics Bureau, Ministry of Internal Affairs and Communications
- Consumer Price Index Frequently Asked QuestionsU.S. Bureau of Labor Statistics
- What is inflation?European Central Bank (ECB)
- Please explain the Bank of Japan's view on "price stability" and its "price stability target."Bank of Japan (Tell me! Nichigin)