yen weakening. domestic wholesale prices continue to decline as a whole mainly in machinery and chemical products, although the decrease in the prices such as of electronic parts seems to have ceased. consumer prices are weakening reflecting the decline in prices of imported products and their substitutes. corporate service prices continue to decrease. as for the conditions surrounding price developments, the effects of the past decline in crude oil prices are likely to continue for a time. on the other hand, the recent yen ’ s depreciation is regarded as a factor to support prices in the period ahead. however, as the economy continues to deteriorate, the balance between supply and demand in the domestic market will increasingly exert downward pressure on prices. furthermore, in addition to the declining trend of machinery prices caused by technological innovations, the decreases in the prices of goods and services reflecting deregulation and the streamlining of distribution channels will continue to restrain price developments. overall, prices are expected to follow a gradual declining trend for the time being. moreover, given the high this report is based on data and information available at the time of the bank of japan monetary policy meeting held on january 15 and 16, 2002. the bank ’ s view of recent economic and financial developments, determined by the policy board at the monetary policy meeting held on january 15 and 16 as the basis for monetary policy decisions. degree of uncertainty regarding future economic developments, the possibility that weak demand will further intensify downward pressure on prices warrants careful monitoring. in the financial market, the overnight call rate continues to move around zero percent as the bank of japan provided further ample liquidity to the money market by aiming at maintaining the outstanding balance of the current accounts at the bank at around 10 to 15 trillion yen due to the changes in the guideline for money market operations decided at the monetary policy meeting held on december 19. interest rates on term instruments are declining on the whole reflecting additional monetary easing measures. the japan premium remains negligible. yields on long - term government bonds rose slightly and are mainly moving around 1. 40 - 1. 45 percent recently. as for the yield spreads between private bonds ( bank debentures and corporate bonds ) and government bonds, while spreads between bonds with relatively high credit ratings and government bonds remain mostly unchanged, those between bonds with low credit ratings and government bonds tend to expand. stock prices rebounded somewhat towards the start of the year, but are weakening recently. in the foreign exchange market, the yen depreciated further towards the

bank of japan presents its quarterly economic outlook for spring 1997 bank of japan, quarterly bulletin, may 1997 ( advance summary ). 1. japan ’ s economy continues on a recovery trend despite some fluctuations caused by the rise in the consumption tax rate, with private demand showing underlying firmness. among final demand items, public - sector investment has decreased, and housing investment has declined reflecting the reversal in the stepped - up demand which took place ahead of the rise in the consumption tax rate. however, net exports have continued on an increasing trend, and business fixed investment has been rising steadily. personal consumption is on a moderate recovery trend. meanwhile, inventories are generally at appropriate levels. in these circumstances, industrial production has been strengthening since autumn 1996. labor market conditions have been improving moderately on the whole. prices have stopped declining. domestic wholesale prices ( adjusted for seasonal electricity rates ) increased in early april 1997 reflecting the rise in the consumption tax rate. however, the downward pressures remain strong on those such as electrical machinery. despite these pressures, domestic wholesale prices have remained unchanged or have increased marginally. this reflects the yen ’ s depreciation and the higher oil prices to date, as well as the moderate improvement in domestic supply and demand conditions. the year - to - year declines in corporate service prices are narrowing, and consumer prices ( nationwide, excluding perishables ) are marginally above the previous year ’ s level. with respect to commercial land prices, prices of large and well - located land suited for major developments have stopped declining, while those of land less suited for use have continued to decline. as for residential land, prices have gradually stopped declining. on the balance of payments, the real trade surplus has been on an increasing trend, and the nominal current - account surplus has also increased, albeit very moderately. 2. in the financial markets, the overnight call rate ( uncollateralized ) rose temporarily around the fiscal year - end, but has since declined to the level slightly below the official discount rate of 0. 5 per cent. the 3 - month cd rate has continued at around 0. 50 - 0. 55 per cent except for the fiscal year - end. the long - term government bond yield has been declining since summer 1996, and has recently moved at a low level of 2. 1 - 2. 2 per cent. stock prices plummeted between the end of 1996 and the beginning of 1997, and have recently stayed at somewhat over ¥18, 000. on the