after pent - up demand runs out, nominal wages need to rise at a higher rate than the inflation rate. in this regard, for the current fiscal year, this spring's base pay increase is expected to be reflected in scheduled cash earnings of full - time employees, and summer bonuses are also likely to increase, mainly for the manufacturing industry, on the back of high corporate profits ( chart 10 ). in addition, wages of non - regular employees, many of whom work in the face - to - face services sector, are also projected to gradually show a clear upward trend, supported mainly by the materialization of pent - up demand in dining - out and travel. thus, wages are expected to rise for this fiscal year. that said, their growth is not projected to exceed cpi inflation. it is worth mentioning that further increases in wages, including base pay, can be expected from the next fiscal year onward, as labor market conditions are likely to tighten on the back of improvement in the economy and the increased rate of inflation is expected to be taken into account in labor - management wage negotiations. under these circumstances, together with a decline in the inflation rate, wage growth is projected to exceed cpi inflation. in general, wage formation is affected by a variety of factors, including labor productivity, growth expectations, labor union bargaining power, and minimum wages. monetary policy, as a macroeconomic policy, also has an impact on such formation through its influence on such factors as labor market conditions. specifically, the bank's monetary easing will first support positive spending activity of firms and households and boost aggregate demand through accommodative financial conditions such as lower funding costs. this will lead to an increase in corporate profits and, through higher corporate demand for labor, bring about a tightening of labor market conditions, which in turn will contribute to wage increases. the bank will continue to firmly support economic activity through monetary easing, aiming to achieve the price stability target, accompanied by wage increases, in a sustainable and stable manner. iv. current situation of and outlook for iwate prefecture's economy lastly, i would like to talk about the economy of iwate prefecture. the bank assesses that the prefecture's economy has picked up moderately. as with nationwide developments, although iwate prefecture's production has seen a halt in its pick - up - - mainly due to the effects of supply - side constraints - - private consumption, especially services consumption, has improved with the impact of such

positive output gap, or the high level of economic activity, will be maintained, and whether firms'stance will shift toward further raising wages and prices under such situation. second is developments in medium - to long - term inflation expectations of firms and households. based on these points, the bank deems that the momentum toward achieving the price stability target has been maintained so far. with the output gap remaining positive, moves to raise selling prices reflecting cost increases have been observed recently in a wide range of firms. as for the outlook, inflation expectations are projected to rise as many of the factors that have been delaying inflation will be resolved gradually and moves to raise prices will spread widely. under these circumstances, the year - on - year rate of change in the cpi is likely to increase gradually toward 2 percent. thus, the bank judges it appropriate to continue with the current monetary policy. however, given that slowdowns in overseas economies have continued to be observed and their downside risks seem to be increasing, it is becoming necessary to pay closer attention to the possibility that the momentum toward achieving the price stability target will be lost. developments in the output gap warrant particular attention. if downside risks to overseas economies materialize, there is a possibility that the growth rate of japan's economy will decelerate substantially through, for example, the prolonged weak exports and firms'investment stance becoming cautious. if this happens, the momentum toward achieving the price stability target could be affected through shrinkage of the output gap. attention also should be paid to the fact that the impact of the so - called adaptive formation mechanism is large in japan, in which the actual inflation rate affects inflation expectations. although crude oil prices temporarily rose somewhat due to increased geopolitical risks, they have declined to some extent from a somewhat longer - term perspective, mainly against the background of the slowdown in overseas economies. if crude oil prices decline further and the actual inflation rate decreases clearly, inflation expectations also may be affected. considering that it is becoming necessary to pay closer attention to the possibility that the momentum toward achieving the price stability target will be lost, the bank will thoroughly reexamine economic and price developments at the next mpm, when it releases the outlook report. it will examine economic and price developments from a broad perspective at the next mpm, based on observations that will be available by the time of the meeting, such as various economic indicators, the reports at the meeting of general managers of the bank's branches, and developments