three hypotheses regarding the reasons for the weak inflation in japan relative to the united states and europe. first, the factors that i pointed out earlier as causes of the surge in inflation in the united states and europe have not been that pronounced in japan. that is, due in part to japanese households ’ strong risk aversion, pent - up demand for private consumption has been limited so far ( chart 2 ). consequently, japan ’ s real gdp still has not recovered to the pre - pandemic level seen in 2019. in addition, it has remained relatively easy for japanese firms to hoard labor, because the labor market is not as fluid as in the united states and employment adjustment 2 / 4 bis central bankers'speeches subsidies have been substantial ( chart 3 ). as a result, in japan, the number of people leaving their jobs has shown no marked increase, which is particularly the case for regular employees, and supply - side constraints caused by a decline in the labor force participation rate have been limited. furthermore, overall demand has been relatively weak in japan, and demand shifts from services to goods have been somewhat slow ( chart 4 ). japan therefore has not seen a surge in goods prices like the one observed in the united states. second, the current phase has once again brought to the fore the “ norm ” in japan — that is, the japanese - specific behavior of firms based on the assumption that prices will not increase easily ( chart 7 ). for example, the supply shortages of automobiles due to difficulties in procuring semiconductors are a global phenomenon, but increases in automobile prices have varied across economies and have been pronounced in the united states. while the varying degrees of increase are partly because supply - side constraints in japan have not been as severe as in the united states and europe — as shown by developments in the respective delivery delay indexes of the purchasing managers ’ index ( pmi ) — they are also attributable to japanese firms ’ cautious price - setting stance. when there are supply - side constraints for certain goods, u. s. firms tend to raise prices relatively quickly and allocate goods by giving preference to customers who are willing to pay higher prices. in contrast, japanese firms seem to place more emphasis on longterm business relationships with customers and respond to their demand as much as possible while keeping selling prices unchanged. in fact, lead - lag correlation coefficients between the delivery delay index and the output prices index for the respective economies show

are virtually level. meanwhile, stock prices have been declining since the start of september in line with a decline in u. s. and european stock prices, as more investors preferred to hold off buying stocks. stock prices are mainly moving around 9, 000 - 9, 500 yen recently. in the foreign exchange market, the yen, after being fluctuating without trend until early september, dropped in mid - september. it is currently being traded in the range of 122 - 123 yen to the u. s. dollar. with regard to corporate finance, private banks remain cautious in extending loans to firms with high credit risks while they continue to be more active in extending loans to blue - chip companies. the lending attitudes of financial institutions as perceived by firms continue to be severe. in the corporate bonds and cp markets, the issuing environment for firms with low credit ratings is still severe, but the environment for firms with high credit ratings is accommodative. credit demand in the private sector continues to follow a downtrend mainly because firms are decreasing their business fixed investment while continuously reducing their debts. amid these developments, private banks ’ lending continues to decline by about 2 - 3 percent on a yearon - year basis. the amount outstanding of corporate bonds and cp issued is recently moving near the previous year ’ s level. the monetary base increased substantially — by around 20 - 30 percent — from the previous year ’ s level. the year - on - year growth rate of the money stock remained around 3. 5 percent. funding costs for firms continue to be at extremely low levels on the whole. overall, the recent financial environment remains extremely easy on the whole in terms of money market conditions. the deterioration in the financing situation of firms has come to a halt. however, the stance of investors toward firms with high credit risks remains severe and the lending attitudes of private banks remain cautious. hence, the developments in the behavior of financial institutions and corporate financing continue to require close monitoring.