background of steady improvement in the employment and income situation. regarding public demand, public investment also has been increasing as the positive effects resulting from the set of stimulus measures formulated in fiscal 2016 became evident. the recent environment in which multiple components of the economy are contributing to its overall expansion in a well - balanced manner is necessary for japan's economy to continue expanding moderately. i consider that such environment is especially important in the operation of the virtuous cycle from income to spending and the functioning of the mechanism in which inflation rises moderately accompanied by wage increases. b. employment and income situation let me now talk about the employment and income situation as one of the factors to consider in assessing the outlook for economic activity and prices. supply - demand conditions in the labor market have continued to tighten steadily. the active job openings - to - applicants ratio - - which has followed a steady uptrend - - has been at a high level last seen in the first half of the 1970s, as the rate of increase in the number of employees has continued to show growth of around 1. 5 percent. moreover, the unemployment rate has been in the range of 2. 5 - 3. 0 percent recently and a perception of labor shortage has heightened. it is expected that the number of employees will keep increasing and that the supply - demand conditions in the labor market will tighten further. on the wage side, total cash earnings per employee have risen moderately, albeit with some fluctuations. the year - on - year rate of increase in hourly scheduled cash earnings of part - time employees, which are responsive to supply - demand conditions in the labor market, recently registered relatively high growth of around 2. 5 percent. with regard to the outlook, the pace of increase in full - time employees'cash earnings is expected to accelerate moderately, with that in base pay accelerating as the rise in inflation expectations becomes more evident. in light of such employment and wage conditions, employee income has increased moderately, albeit with fluctuations. going forward, it is likely to increase at a moderate pace, but with differences in wage - setting mechanisms between full - time and part - time employees, there is a risk that firms will remain cautious with their decisions on wage setting. in this context, i am paying attention to firms'stance regarding wages going forward. c. prices next, i will discuss the output gap and inflation expectations, which are the main factors that determine inflation rates. first, the output gap has improved steadily, being in the range of 1. 0

, while the rate of change for all items less fresh food and energy has remained slightly positive. with regard to the outlook, the year - on - year rate of change in the cpi ( all items less fresh food ) is likely to continue on an uptrend, mainly on the back of the improvement in the output gap and the rise in medium - to long - term inflation expectations. the rate will likely reach around 2 percent in around fiscal 2019. specifically, the medians of the policy board members'forecasts of the year - on - year rate of change in the cpi ( all items less fresh food ) presented in the october 2017 outlook report are 0. 8 percent for fiscal 2017, 1. 4 percent for fiscal 2018, and, excluding the direct effects of the scheduled consumption tax hike, 1. 8 percent for fiscal 2019. 3 ii. characteristics of japan's economy and keys to assessing the outlook for economic activity and prices in what follows, i would like to outline my understanding of the characteristics of the recent developments in japan's economy and then discuss several points that i think deserve particular attention in terms of realizing the outlook for economic activity and prices that i mentioned earlier. the consumption tax hike scheduled to take place in october 2019 - - to 10 percent - - and the reduced tax rate to be applied to food and beverages - - excluding alcohol and dining - out - - and newspapers are incorporated in the forecasts, but individual policy board members make their forecasts of the cpi based on figures excluding the direct effects of the consumption tax hike. the forecasts for the cpi for fiscal 2019 that incorporate the direct effects of the consumption tax hike are constructed as follows. first, the contribution to prices from the tax hike is mechanically computed on the assumption that the tax increase will be fully passed on for taxable items. the cpi will be pushed up by 0. 5 percentage point. second, this figure is added to the forecasts made by the policy board members. a. characteristics of the recent developments in japan's economy one of the characteristics of the recent developments in japan's economy is how the economic growth has been led by various components in a well - balanced manner. in terms of external demand, exports have been on an increasing trend, with overseas economies continuing to grow at a moderate pace. for domestic private demand, business fixed investment has been on a moderate increasing trend, with corporate profits and business sentiment improving, and private consumption has increased its resilience against the