although many small firms still see their financial positions as weak, the overall financial positions of firms, including small ones, have continued to show signs of easing. the cpi ( excluding fresh food ) is declining on a year - on - year basis due to the substantial slack in the economy as a whole, but the decline leveled out in august 2009 and the moderating trend of decline has continued. the outlook for the trend change in prices is determined by the aggregate supply and demand balance and the medium - to long - term inflation expectations. it should be noted that, statistically, the year - on - year rate of change in the cpi will decline for a year due to the introduction of subsidies for high school tuition and other policy measures in fiscal 2010, but in assessing the trend change in prices, it is necessary to exclude such one - off factors. in terms of the trend change in prices, with medium - to long - term inflation expectations likely to be stable, the year - on - year rate of decline in the cpi ( excluding fresh food ) is expected to continue to moderate as the aggregate supply and demand balance improves gradually. while i have thus far explained the baseline scenario for economic activity and prices, the bank is also fully aware of the risks concerning such scenario. upside risks to the scenario are developments in emerging and commodity - exporting economies. the robust growth of emerging and commodity - exporting economies has driven the pick - up of japan ’ s economy. if the growth in those economies further accelerates, it will pose an upside risk to economic activity in japan. meanwhile, downside risks, although somewhat diminished, include the possible consequences of balance - sheet adjustments in the united states and europe as well as potential changes in firms ’ medium - to long - term growth expectations. moreover, attention should continue to be paid to various recent international financial developments and their effects. with regard to prices, there is a risk that inflation will rise more than expected in the event of a rise in commodity prices due to higher growth rates in emerging and commodity - exporting economies. on the other hand, there is also a risk that the rate of inflation might decline due, for example, to a decline in medium - to long - term inflation expectations. ii. conduct of monetary policy the bank recognizes that japan ’ s economy is faced with a critical challenge of overcoming deflation and returning to a sustainable growth path with price stability. therefore, the bank has been implementing various measures, taking into account the two factors

kazuo ueda : the bank's semiannual report on currency and monetary control statement by mr kazuo ueda, governor of the bank of japan, before the committee on financial affairs, house of councillors, tokyo, 18 june 2024. * * * 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 has recovered moderately, although some weakness has been seen in part. exports have been more or less flat. with corporate profits improving, business fixed investment has been on a moderate increasing trend. the employment and income situation has improved moderately. private consumption has been resilient, although the impact of price rises has remained and automobile sales have continued to be pushed down by a suspension of shipment at some automakers. with regard to the outlook, japan's economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions. the year - on - year rate of increase in the consumer price index ( cpi ) for all items excluding fresh food has been in the range of 2. 0 - 2. 5 percent recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a pass - through to consumer prices of cost increases led by the past rise in import prices have waned. regarding the outlook, while the effects of the pass - through to consumer prices of cost increases led by the past rise in import prices are expected to wane, the rate of increase is projected to be pushed up through fiscal 2025 by factors such as a waning of the effects of the government's economic measures pushing down cpi inflation. meanwhile, underlying cpi inflation is expected to increase gradually and, in the second half of the projection period of the april 2024 outlook for economic activity and prices, it is likely to be at a level that is generally consistent with the price stability target of 2 percent. concerning risks to the outlook, there remain high uncertainties surrounding japan's economic activity and prices, including developments in overseas economic activity and prices