thus have the potential to become extremely unstable in the future as the end to the unprecedented monetary easing approaches. to prevent the emergence of this kind of instability, the bank will endeavor to offer a lucid explanation of its assessment of economic activity and prices as well as the thinking behind its conduct of monetary policy. furthermore, the bank will continue to enhance its communication with market participants so that they will be better able to judge and predict the future conduct of monetary policy. the content of this communication will depend on future developments in the economic and financial situation. some may comment that the explanation of the thinking behind the bank's conduct of monetary policy and communication with market participants in the october outlook report is abstract and difficult to understand. this is to an extent inevitable, since the response of monetary policy must depend on the economic and financial situation at the time. in the current instance, the bank's decision to present its thinking in the outlook report was taken under the premise that central banks and market participants should broadly share, to the extent possible, a common understanding about the conduct of monetary policy. this should make it possible to avoid undue speculation when changes are made to an unprecedented policy framework such as the current quantitative easing. with this in mind, the bank will continue to maintain effective communication with market participants.

financial assets. for example, it is said that flat - panel tvs and expensive guided tours are most actively purchased by the elderly. moreover, a recovery trend has also been discernible recently in the propensity to consume of people other than the elderly. it seems that firms have succeeded in inducing consumption across a range of customer age groups. a breakdown by spending behavior shows that spending is increasing in a wide range of areas : these include travel both within japan and abroad, education geared toward lifelong learning and self improvement, and health and sports - related services. this suggests abatement of pessimism about future household income as the economy continues to recover. in this regard, the momentum for recovery in household consumption may be expected to receive a further boost as household income starts to increase. c. divergence between developments in economic activity and prices as i mentioned earlier, consumer prices have recently been less responsive to increased economic activity. the third feature of the current recovery phase is therefore the divergence between developments in economic activity and prices. underlying this divergence is the fact that firms are now able to produce a greater number of products more efficiently and at a lower labor cost. higher productivity has been achieved in a number of ways. firstly, as in previous recovery phases, a cyclical mechanism has been working to put to good use idle labor and capital. secondly, labor and capital resources have been used more efficiently than in previous recoveries, due both to firms'own streamlining efforts and to deregulation in various fields. thirdly, there may have been steady long - term improvements in economic efficiency, due to technological innovation, especially the progress made in it. at the same time, on the wage front, firms have been restraining labor costs by hiring part - time and temporary workers instead of regular employees. as a result of this higher productivity and wage restraint by firms, unit labor costs, or labor costs per unit of output, have been declining significantly for the past few years and have reached an unprecedented low level. the declining unit labor costs have absorbed rises in various other costs, stopping consumer prices from increasing despite the continued economic recovery. the current decline in prices thus seems to be undergoing a qualitative change : from being rooted in a large outgap, it has gradually sprung more from improvements in productivity and firms'efforts to trim labor costs to enhance their competitiveness. it is unlikely, however, that this situation will continue forever. it is undoubtedly the case that higher productivity