were many who argued that it would be difficult to raise wages. recently, however, more firms are acknowledging that wage increases are essential to hiring and retaining employees. as labor market conditions have begun to grow increasingly tight, it appears that firms'wage - setting stance is beginning to change. c. current price developments in japan next, i would like to talk about price developments in japan. specifically, i will touch upon producer and consumer prices. 1. producer prices i will first explain developments in producer prices. the year - on - year rate of change in the import price index has become negative recently because prices of crude oil and other goods have been at somewhat reduced levels ( chart 8 ). in this situation, the year - on - year rate of change in the producer price index ( ppi ), which is based on prices of goods traded within the domestic corporate sector, slowed to 3. 6 percent for july 2023, as the impact of the earlier raw material cost increases gradually waned. nevertheless, the year - on - year change in the ppi has remained positive amid a continued pass - through to selling prices of higher costs, mainly for items in downstream stages of supply chains such as machinery, beverages, and food. the year - on - year rate of change in the services producer price index ( sppi ) has continued to increase moderately on the whole, reflecting higher prices for items such as hotels, passenger transportation, and services related to business fixed investment, against the backdrop of a recovery in travel demand - - including inbound tourism demand - - and a rise in personnel expenses and property costs. 2. consumer prices the year - on - year rate of increase in the consumer price index ( cpi ) for all items less fresh food has slowed, mainly due to the effects of pushing down electricity and gas charges from the government's economic measures. however, with a continued pass - through to selling prices of increases in raw material costs, the rate of increase has remained relatively high, at 3. 1 percent for july 2023 ( chart 9 ). firms'price - setting stance is beginning to change, as firms across a broad range of industries - - including competitors - - have opted for price hikes in reflection of the considerable increase in raw material costs. the cpi ( all items less fresh food and energy ) shows that the rates of increase have been accelerating for a wide range of goods, especially for food and daily necessities, and for services, chiefly hotel charges.

have explained the case where prices and inflation expectations deviate upward from the bank's baseline scenario. if, on the other hand, downside risks to japan's economic activity and prices materialize, the current framework of yield curve control is designed to ensure that monetary easing effects will be maintained through a decline in long - term interest rates. as i have described, i consider that the sustainability of monetary easing has been enhanced by the new measure, which enables the bank to nimbly respond to both upside and downside risks to economic activity and prices. a review of monetary policy from a broad perspective as a last note, let me talk about a review of monetary policy from a broad perspective, which the bank has been working on. with this review, the bank aims to analyze the effects and side effects of its monetary policy conduct over the past 25 years since the late 1990s, when japan's economy fell into deflation. in doing so, the bank not only plans to conduct internal analyses but also to incorporate diverse expertise. in that sense, i consider that today's meeting with local leaders is a truly valuable opportunity. i will be very glad to hear comments on the bank's conduct of monetary policy and changes in firms'behavior over the years, in addition to views on recent economic developments in kochi. thank you. economic activity, prices, and monetary policy in japan speech at a meeting with local leaders in kochi september 7, 2023 nakagawa junko member of the policy board bank of japan chart 1 overseas economies world economic outlook global pmi y / y % chg. imf projections s. a., di world - 2 manufacturing - 4 cy 90 source : imf. services cy 08 note : figures for manufacturing are the j. p. morgan global manufacturing pmi. figures for services are the j. p. morgan global services business activity index. source : copyright © 2023 by s & p global market intelligence, a division of s & p global inc. all rights reserved. chart 2 corporate sector in japan corporate profits business conditions s. a., tril. yen s. a., tril. yen - 20 - 40 di ( " favorable " - " unfavorable " ), % points all industries manufacturing nonmanufacturing sales ( left scale ) current profits ( right scale ) cy 10 " unfavorable " " favorable " - 60 cy 90 notes : 1. based on the tankan. all enterprises