looking at the recent situation surrounding wages, labor market conditions have tightened even relative to last year ( chart 8 ). corporate profits, which are the source of wage hikes, have increased due to improvement in economic activity, progress in the pass - through of cost increases to selling prices, and the yen's depreciation. meanwhile, the labor share seems to have declined recently ( chart 9 ). although a pass - through of higher raw material prices to selling prices is necessary to secure corporate profits, price rises due to this pass - through mean an increase in the burden of households. in order for the economy to see a sustained recovery led by domestic demand and for the virtuous cycle between wages and prices to intensify, it is essential that the increase in corporate profits lead to improvement in household income. therefore, in terms of price setting, the key is whether firms will be able to reflect increases in costs besides raw material costs, such as wages and indirect costs, in selling prices. if firms cannot reflect wage increases in selling prices to a certain extent, the virtuous cycle between wages and prices will not last long. on this point, attention should be paid to the fact that the year - on - year rate of increase in prices of services, for which labor costs account for a large share in total costs, has gradually accelerated recently. however, what we have heard from firms gives me the impression that many of them still consider it difficult to pass on higher labor costs to selling prices ( chart 10 ). recently, the government formulated guidelines on price negotiations for an appropriate pass - through of labor costs, and its impact on firms'price - setting behavior warrants attention. the bank's thinking on the conduct of monetary policy next, i will briefly explain the bank's thinking on the conduct of monetary policy given the wage and price developments just described. to this day, the bank has patiently continued with monetary easing while striking a balance between its positive effects and side effects. this policy response may seem in contrast to responses taken by central banks in the united states and europe, which had raised policy interest rates substantially to address the rapid increase in inflation. the most significant factor behind the difference in policy responses between these central banks and the bank of japan is the divergence in the situation surrounding prices and wages. the central banks in the united states and europe had taken a wait - and - see approach when prices began to rise, based on the assessment that the rises were "

the cabinet, subject to the consent of the house of representatives and the house of councillors, and shall not be dismissed against their will during their terms of office of five years, except in special cases such as becoming incapable of carrying out their duties due to mental or physical disorder. at the same time, we the policy board members conduct our daily duties by fully recognizing the responsibility that we – who are not chosen by election – are granted considerable authority to make monetary policy decisions, which significantly affect people ’ s lives. therefore, in order to maintain and enhance the public ’ s trust, i believe that it is vital to further enhance the transparency of the conduct of monetary policy – that is, communication to the diet and the public by thoroughly explaining the bank ’ s thinking on the conduct of monetary policy. we are also listening with all due respect to the government ’ s and public ’ s opinions on monetary policy conduct and working to incorporate them into policymaking, and i regard today ’ s meeting as one such opportunity for this. bis central bankers ’ speeches