private demand. with regard to prices, import prices are rising due to the increase in international commodity prices such as crude oil prices, along with the recent depreciation of the yen. domestic wholesale prices, notwithstanding the fall in prices of electric machinery, are flat mainly due to the rise in prices of petroleum and chemical products reflecting an increase in crude oil prices. meanwhile, consumer prices are somewhat weak due to a decline in prices of imported products reflecting the past this report was written based on data and information available when the bank of japan monetary policy meeting was held on 8 march 2000. the bank ’ s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on 8 march as the basis of monetary policy decisions. appreciation of the yen. corporate service prices are still falling slowly. as for the outlook, upward pressure on prices is likely to arise from the gradual improvement in domestic supply - demand balance, as shown in the decline in inventories, and from the rise in crude oil prices. on the other hand, downward pressure is expected from the long - term declining trend of machinery prices due to technological innovations and from the fall in prices of imported products reflecting the past appreciation of the yen. on balance, overall prices are likely to remain unchanged for the time being. however, attention should still be paid to the downward pressure on prices stemming from weak demand, as clear signs of a self - sustained recovery in private demand have not yet been observed and wages continue to fall. in the financial market, the overnight call rate has generally stayed near zero, except for a temporary rise reflecting concerns about the possible computer problems related to the leap year, and financial institutions have been confident about the availability of overnight funds. the amount outstanding of funds in the call money market increased slightly in late february, and decreased thereafter. interest rates on term instruments have generally been stable at an extremely low level. the japan premium remains negligible. yields on long - term government bonds were generally above 1. 8 % in february, but declined somewhat from the beginning of march, and are recently ranging between 1. 7 % and 1. 8 %. the yield spread between private bonds ( bank debentures and corporate bonds ) and government bonds continues narrowing, primarily that between private bonds with relatively low credit ratings and government bonds. stock prices have been firm on the whole, and are currently moving around 20, 000 yen. in the foreign exchange market, the yen weakened against the us dollar for most

macroeconomic consequences. in the 2000s, reflecting increasing deflationary pressure, firms were unable to raise sales prices. faced with stagnant sales, firms resorted to cutting expenses, including labor costs, to secure profits. efforts to restrain labor costs first took the form of a shift to the use of nonregular employees. the share of part - time workers in total employees consistently increased in the 1990s following the burst of the asset bubble at the beginning of the decade, and the increase continued unabated in the 2000s ( chart 3 ). efforts to restrain labor costs also took the form of restraining wages. wages of non - regular employees are largely determined on an ad hoc basis and fluctuate reflecting changes in supply and demand conditions. by contrast, wages for regular employees are largely determined based on long - term implicit contracts. in the face of protracted deflation and severe labor conditions, employees were put at a disadvantage and accepted employers ’ demand to reduce wages rather than lose their job. thus, unlike in the united states and europe, where unemployment tends to increase during a recession, in japan unemployment did not increase substantially, but instead wages declined considerably. the year - on - year rate of change in wages was above that in the bis central bankers ’ speeches consumer price index ( cpi ) until the late 1990s, but has generally been below it since then ( chart 4 ). consequently, on a macro basis, japan ’ s labor share declined noticeably in the 2000s. although the labor share fluctuated considerably during and immediately after the global financial crisis, the average for the decade was lower than that for the 1990s ( chart 5 ). furthermore, deflation significantly affected firms ’ investment behavior. the prospect of deflation reduced the discounted present value of investment returns and lowered firms ’ investment appetite. in addition, it led firms to hoard cash to prepare for potential losses in the future. as a result, firms, which used to be net investors, turned into net savers and have stayed in that position ( chart 6 ). following the burst of the asset bubble, japanese firms were forced to save in order to reduce excess debt. however, they continued to save even after the excess debt problem had been resolved in the 2000s. particularly in recent years, net saving in the corporate sector has become much larger than net saving in the household sector. this change of firms into net savers has thrown the economy into a contractionary equilibrium through the paradox of thrift. if firms use