added or those similar to the previous ones ; ( 3 ) whether manufacturers will raise the prices of goods for which they have postponed increases so far ; ( 4 ) whether the cost that has been absorbed by the distribution sector will be passed on to sales prices ; and ( 5 ) whether the services sector can continue to pass the rise in labor costs on to final prices. that being said, many firms are experiencing less room for further cost reductions. in these circumstances, they need to increase sales in order to maintain or raise the level of profits in the face of upward pressure on labor costs. in the current situation of it being difficult to expect an increase in sales volumes as the aging population and declining birthrate have progressed, the only solution is to raise the unit prices of goods and services. as firms start to increase prices, the focus is on whether consumers will accept such increases. in this regard, i consider that the key to a continued steady rise in the underlying trend in prices is whether consumers will be optimistic about future developments in income and wages. c. wages recently, labor market conditions have been extremely tight, and an increasing number of firms are experiencing labor shortages. in textbook theory, wages are determined by the supply - demand balance in the labor market, but statistics show that the pace of increase in wages as a whole has remained only moderate. this is because regular employees ’ wages, which account for a major part of total employee income, have been rising only moderately, bis central bankers ’ speeches although the hourly pay of non - regular employees has been rising markedly, reflecting tight labor market conditions. one major cause behind this situation is the framework for regular employees in japan, although it is gradually changing. it is unique to japan because of the country ’ s systems and practices. let me elaborate on this point. in japan, where it is difficult to discharge regular employees, excesses and shortages of regular employees are balanced by the number of new graduates to be hired. new graduates go through in - house training so that they become well suited to their individual firms. the salaries and other benefits available to regular employees throughout their careers are significant as long as they are regular employees. these factors lower their labor mobility to move from one firm to another. if regular employees do not change jobs despite some dissatisfaction with their salary levels, employers will have less incentive to raise the levels of salaries to secure suitably qualified employees. thus, employers take the initiative in setting regular employees ’ wages. even if corporate profits are increasing

. for example, firms have substantially reduced their fixed investment related to crude oil production, which accounts for a large share of global business fixed investment. firms that provide oil - related facilities and services have been particularly affected. furthermore, oilproducing countries, which had been in excess of funds, are now in shortage of funds, and this has caused a reversal in the flow of funds, creating considerable stress not only on the economic activity of these countries but also on global stock markets and foreign exchange markets. as i have described, the substantial decline in crude oil prices has had large negative impacts ; however, when viewed in the somewhat longer term, these will be net positive effects on the global economy, because income will be transferred from economies with a low propensity to consume to those with a high propensity to consume, and from capital - intensive industries to more labor - intensive industries. i consider that the overall positive effects on japan – for which the self - sufficiency rate of crude oil is extremely low – are particularly large, although the magnitude of the effects, both positive and negative, differs by firm and industry. hikes in crude oil prices have often caused global economic recessions. however, there have never been recessions stemming from a decline in these prices. the immediate negative effects of the decline in these prices – such as those on financial markets – have been more pronounced than the positive effects, which will take time to become apparent, but it is my view that we do not need to be overly concerned about the present situation. b. prices a substantial decline in crude oil prices leads to a fall in energy prices, and consequently pushes down the level of overall prices. some say that developments in individual prices do not affect the level of overall prices, because such developments cause prices of other items to move inversely to these individual prices. for example, even if energy prices decline, real income will increase accordingly, and thus prices other than energy prices will rise through an increase in spending. while this may be true in the long run, such an outcome is unlikely to occur within about two years, the time horizon that central banks typically consider as appropriate in conducting monetary policy. as noted in the january 2016 outlook report, the bis central bankers ’ speeches projected timing of the year - on - year rate of increase in the cpi ( all items less fresh food ) reaching the price stability target of 2 percent has been delayed as the overall inflation rate will be pushed down due to the substantial