goods, and geopolitical factors and oil prices. in these circumstances, the recent weakness in domestic stock prices and its potential adverse effects on the financial system and the economy should be monitored carefully. on the price front, import prices are declining mainly due to the u. s. dollar ’ s depreciation against the yen from spring toward summer, but international commodity prices including crude oil have recently risen. domestic wholesale prices have weakened, reflecting the decrease in import prices to date. moreover, consumer prices remain on a gradual downtrend and corporate services prices continue to decline. as for the conditions surrounding price developments, the balance between supply and demand is expected to keep exerting downward pressure on prices for a while amid persistently weak domestic demand, although the completion of inventory adjustment and the rise in capacity utilization rates will support prices to some degree. moreover, factors such as the ongoing technological innovations in machinery, deregulation, and the streamlining of distribution channels will continue to restrain prices. this report is based on data and information available at the time of the bank of japan monetary policy meeting held on september 17 and 18, 2002. the bank ’ s view of recent economic and financial developments, determined by the policy board at the monetary policy meeting held on september 17 and 18 as the basis for monetary policy decisions. under these circumstances, domestic wholesale prices are projected to continue to be weak for a while. consumer prices are expected to stay on a declining trend for the time being at the current gradual pace. while the slower growth in imports of consumer goods is expected to alleviate the downward pressure on prices to some extent, the faster pace of decline in wages may possibly reinforce the ongoing decline in prices, especially for services prices. as for the financial market, the outstanding balance of the current accounts at the bank of japan is moving around 15 trillion yen as the bank continues to provide ample liquidity. under these circumstances, in the short - term money markets, more market participants have come to feel that there is an excess of liquidity in the market and the overnight call rate continues to move at very close to zero percent. also, longer - term interest rates are declining. yields on long - term government bonds followed a downtrend in line with a decline in yields on overseas long - term government bonds and in domestic and overseas stock prices, in addition to widespread perceptions among market participants that there is an excess of liquidity. yield spreads between private bonds ( bank bonds and corporate bonds ) and government bonds

i mentioned earlier, the year - on - year growth in the goods price index based on the point - of - sale ( pos ) data collected through chain stores appears to have slowed. the price index based on the pos data covers only around 20 percent of the consumer price index ( cpi ) in terms of its weight, so the trend in the pos data - based index may not necessarily affect overall prices immediately. service prices, which have a substantial weight in the cpi, may have a pent - up potential for a rise following the recent increase in hourly wages for non - regular employees. unlike changes in food and clothing prices, changes in prices of individual services, which are provided by many small firms, are seldom featured in media reports, making it difficult to keep track of them. therefore, looking at consumer price statistics is the only way to examine the trend of overall service prices. as for the outlook, while the year - on - year growth rate of prices of food products and durable consumer goods are expected to peak out as indicated by the pos data, the key will be the extent to which prices of individual services, with their pent - up potential for a rise, can offset that. however, house rent and imputed rent, which have a large weight in service prices, are strongly correlated with wages, and given the results of the labor - management wage negotiations this spring, it may be difficult to expect much of a rise in rents. house rent and imputed rent are not adjusted for quality associated with the passage of time, so the presence of a downward bias in consumer price statistics has been pointed out. with respect to public service prices, which also have a large weight, there are various factors that constrain price bis central bankers ’ speeches increases. one such factor is the norm applied to prices by those who are reluctant to tolerate a hike in fees for public services. in consideration of all these factors, it is highly uncertain whether or not an increase in service prices will offset an expected drop in the year - on - year growth rate of goods prices, resulting in a higher growth or a similar rate of growth in overall prices. although people ’ s inflation expectations over the medium to long term are relatively stable, their expectations over the short term have been affected in a backward - looking manner by the recent price trend that reflects energy price movements. this is clearly apparent in firms ’ inflation expectations indicated in the tankan ( short - term economic survey of enterprises in