other factors moreover, based on japan's experience, i think that, if wages and prices start to move, this will likely add to the positive effect just mentioned on the overall economy. as i have explained today, a key feature of the low - inflation environment that japan fell into was the strong bias toward the status quo in wage - and price - setting behavior, which resulted in prices of many items being unchanged. this meant that relative prices between individual goods were less likely to change and the market's price discovery function was less effective. as a result, it may have become inefficient to allocate resources, which may have led to reduced productivity of the economy as a whole. the same is true for wages. while i believe that it was important to maintain employment during difficult times by freezing base pay and cutting bonuses, if a situation where wages do not increase easily continues even after these difficult times pass, the allocation of labor and changes in the wage system will become static. if the situation becomes such that wages increase every year, this could lead to more efficient allocation of labor through setting wages flexibly. in this regard, changes have been seen recently as the labor market has tightened, such as an increasingly active labor market for regular employees looking for new jobs. these developments are also expected to benefit the economy as a whole, as they promote the appropriate allocation of human resources to areas where they are most needed. impact on firms'behavior so, how will this movement in wages and prices affect the business community? 3 as part of its review of monetary policy from a broad perspective, which was initiated this spring, the bank of japan is currently conducting a large - scale survey of firms. in the survey, it is asking firms about whether and why a state in which wages and prices move or do not move is preferable for them, as well as common questions regarding their views on corporate behavior over the past 25 years and recent changes in this behavior. many of the firms represented by you have also participated in the survey, and i would like to thank you for your cooperation. while the bank aims to understand the views of the business community through such dialogue, one possible hypothesis at this time is that, in a state in which wages and prices move in general, it will be easier for individual firms to do so as well. for example, if wages and prices move, it may be easier than in the past for firms to be more flexible in their wage and price setting

haruhiko kuroda : the bank of japan's semiannual report on currency and monetary control statement by mr haruhiko kuroda, governor of the bank of japan, before the committee on financial affairs, house of representatives, tokyo, 18 november 2022. * * * introduction the bank of japan submits to the diet its semiannual report on currency and monetary control every june and december. i am pleased to have this opportunity today to talk about recent economic and financial developments and about the bank's conduct of monetary policy. i. economic and financial developments i will first explain recent economic and financial developments. japan's economy, despite being affected by factors such as high commodity prices, has picked up as the resumption of economic activity has progressed while public health has been protected from the novel coronavirus ( covid - 19 ). overseas economies have recovered moderately on the whole, but slowdowns have been observed, mainly in advanced economies. exports and industrial production have increased as a trend, with the effects of supply - side constraints waning. corporate profits have been at high levels on the whole, and business sentiment has been more or less unchanged. in this situation, business fixed investment has picked up, although weakness has been seen in some industries. the employment and income situation has improved moderately on the whole. private consumption has increased moderately, despite being affected by covid - 19. with regard to the outlook, japan's economy is likely to recover, with the impact of covid - 19 and supply - side constraints waning and with support from accommodative financial conditions and the government's economic measures, although it is expected to be under downward pressure stemming from high commodity prices and the slowdowns in overseas economies. the year - on - year rate of increase in the consumer price index ( cpi ) for all items excluding fresh food has accelerated due to rises in prices of such items as energy, food, and durable goods. regarding the outlook, it is expected to decelerate from the beginning of calendar year 2023 toward the middle of fiscal 2023 because the contribution of such price rises to this cpi is likely to wane. thereafter, it is projected to accelerate again moderately on the 2 back of improvement in the output gap and rises in medium - to long - term inflation expectations and in wage growth. concerning risks to the outlook, there have been extremely high uncertainties for japan's economy, including the following :