their lowest levels in over two years, falling by 6 and 4 per cent respectively. russian stocks also dropped by similar amounts reaching their lowest level in two years, resulting in the authorities in russia to suspend trading on 17 and 18 september 2008. for that entire week, the stocks of most emerging market countries showed significant declines. those included israel ( - 10, 8 per cent ) ; romania ( - 7, 3 per cent ) ; thailand ( - 4. 5 per cent ) ; south africa ( - 2, 9 per cent ) ; hungary ( - 2, 1 per cent ) ; czech republic ( - 2, 0 per cent ) ; poland and turkey ( - 1, 9 per cent ) and korea ( - 1, 5 per cent ). emerging market bond indices ( embi ) spreads over us treasuries widened sharply during the week under review. the widest spreads were recorded in russia ( 52 bps ) ; argentina ( 42 bps ) ; venezuela and ukraine ( 30 bps ) and china ( 28 bps ). south africa and poland registered the smallest movements with their spreads over us treasuries widening by some 5bps. the currencies of most emerging markets weakened considerably against the usd during the week starting on 15 september on the back of major equity and bond selling in these countries. the biggest depreciations were registered by chile ( - 3, 2 per cent ) followed by brazil ( - 2, 0 per cent ) and iceland ( - 1, 5 per cent ). in the year to date, non - residents have been net sellers of equities to the value of around r52 billion, while net bond sales have totalled almost r17 billion. however it is important to note that these sales do not necessarily translate into actual capital outflows. there is little doubt that the traditional source of foreign capital inflows, that is flows into the equity market, may remain under pressure in the coming months as a result of continued risk aversion. despite the global turmoil, the financial account in south africa has remained in positive territory. while the deficit on the current account of the balance of payments remains at elevated levels, some pressure on the import side will be taken off by growth, lower oil prices and the poor performance of the rand. unfortunately, with a rapidly slowing global economy, commodity prices are expected to remain subdued, and the export markets for commodities and manufactured goods in the current climate will remain a challenge. conclusion

at the beginning of november, the bank released its projections through fiscal 2018 in the outlook for economic activity and prices ( outlook report ). today, i would like to explain the bank's projections for economic activity and prices based on this outlook report, as well as its thinking on the conduct of monetary policy. i. the current situation of and outlook for japan's economic activity and prices to begin with, let me make three points on the outlook for japan's economy. please refer to chart 2. the first point is that extremely powerful economic stimulus measures are being implemented, both on the monetary and fiscal sides. the bank will adhere to powerful monetary easing under the new policy framework in order to achieve the price stability target of 2 percent, while the government will steadily implement its large - scale stimulus measures, amounting to 28 trillion yen in project size, with the diet's recent approval of the supplementary budget. synergy effects are produced in a case where a government proactively carries out fiscal spending while a central bank provides accommodative financial conditions with a view to achieving its price stability target ; this is known to make the stimulative effects on economic activity more powerful. indeed, such effects of the so - called policy mix are expected to be seen going forward. the second point is that, on the back of the effects of a policy mix as well as the recovery in overseas economies, japan's economy is likely to expand moderately, with a virtuous cycle from income to spending being maintained in both the corporate and household sectors. specifically, as indicated in red in the chart, it is likely to continue growing at a pace above its potential through the projection period - - that is, through fiscal 2018 - - at around 1 percent. third, on the price front, the year - on - year rate of change in the cpi for all items less fresh food is likely to be slightly negative or about 0 percent for the time being, as shown in blue in the chart. thereafter, the rate of change is expected to increase toward 2 percent in the second half of the projection period in line with an improvement in the output gap, as will likely be evidenced by a further decline in the unemployment rate, and a rise in medium - to long - term inflation expectations. in what follows, i will explain the outlook for economic activity and prices in more detail. a. the current situation of economic activity and its outlook developments in the corporate sector looking at developments in