, 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

figure to which they attach the highest probability of realization. these forecasts are then shown as a range, with the highest figure and the lowest figure excluded. the range does not indicate the forecast errors. 3. each policy board member makes their forecasts taking into account the effects of past policy decisions and with reference to views incorporated in financial markets regarding the future conduct of policy. source : bank of japan. chart 8 prices and wages y / y % chg. cpi ( less fresh food ) hourly scheduled cash earnings - 1 - 2 - 3 - 4 fy 85 notes : 1. for hourly scheduled cash earnings, q1 = march - may, q2 = june - august, q3 = september - november, and q4 = decemberfebruary. figures are for full - time and part time employees before fiscal 1994 and for full - time employees thereafter. 2. the cpi figures are bank staff estimates and exclude the effects of the decline in mobile phone charges, consumption tax hikes, free education policies, and the " go to travel " campaign. sources : ministry of health, labour and welfare ; ministry of internal affairs and communications. chart 9 real gdp and number of persons employed decomposition of change in real gdp growth avg., y / y % chg. rate of change of labor productivity ( real gdp per worker ) rate of change in the number of workers aged 65 and over rate of change in the number of workers aged 15 - 64 number of persons employed mil. mil. aged 65 and over ( left scale ) women aged 15 - 64 ( left scale ) men aged 15 - 64 ( left scale ) all ( right scale ) real gdp growth rate - 1 1980s 1990s 2000s 2010s cy 80 sources : cabinet office ; ministry of internal affairs and communications. chart 10 growth of japan's economy through a virtuous cycle of corporate activity and household disposable income growth of overseas economies increase in selling prices increase in added value and labor productivity wage inflation asset formation using households'surplus funds increase in household disposable income expansion of firms'investment ; business selection and concentration expansion of exports rise in prices expansion of corporate sales and profits expansion of households'dividend income expansion of household spending chart 11 household disposable income japan united states tril. yen germany tril. usd 2. 2 2. 0 1. 8 1. 6 1. 4 tril. eur 1. 2 1. 0 disposable income employee compensation 0