layoffs in the event of a large negative shock to the economy. in contrast, japanese firms, which place priority on long - term employment, tend to first cut working hours and raise the number of employed persons not at work in response to a decrease in demand, and thereby try to maintain employment. this difference in the employment stance may also reflect the distinct safety nets in the respective labor markets. in the u. s., unemployment insurance benefits, which are paid directly to individual workers, play an important role. in japan, employment adjustment subsidies, which cover firms'wage payments, help firms hoard labor even during a recession. the differences in labor market dynamics have affected developments in the inflation rates ( chart 4 ). in the u. s., the year - on - year rate of change in the cpi recently has been high, exceeding 5 percent for the first time in 30 years. on the other hand, in japan, it has been only about 0 percent. that said, the recent low inflation rate in japan is mainly due to unusual factors such as a significant reduction in mobile phone charges. this means that, when these factors are excluded, japan's cpi is not as weak as the headline figures suggest. however, even on an adjusted basis, the inflation rate in japan has been well below that in the u. s. contrasting developments in the cpi of each country reflect differences not only in inflation expectations but also in supply - side constraints. u. s. firms have experienced an unexpectedly rapid surge in demand along with the reopening of the economy, while their employment has not yet fully recovered. this has brought about serious bottlenecks such as labor shortage and difficulty procuring materials and parts. as a result, they have raised wages to quickly secure labor and also raised their prices of goods and services to curb excess demand. in contrast, demand in japan has not recovered as rapidly as that in the u. s. in addition, as many japanese firms have essentially maintained their labor, supply - side constraints in japan have not been as severe as in the u. s., and there has been no pressing need for firms to raise wages and selling prices. to sum up, in response to the common shock of the pandemic, the u. s. and japan have been restarting their economic activities by making the most of their respective characteristics - that is, for the u. s., high mobility in the labor market and flexible adjustments in wages and

a fragile state, continuous attention should be paid to the risk of a negative impact on the economy induced by developments in foreign and domestic capital markets via corporate and household confidence. with regard to prices, import prices continue to decline mainly reflecting the softening of international commodity prices. domestic wholesale prices are also declining faster from the effects of the decline in crude oil prices in addition to the continuous decreases in prices of electrical machinery and materials. consumer prices are weakening owing mainly to the decline in prices of imported products and their substitutes. corporate service prices continue to decrease. as for the conditions surrounding price developments, international commodity prices such as of crude oil and nonferrous metals remain weak. also, with the prolonged adjustments in economic activity, 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 this report is based on data and information available at the time of the bank of japan monetary policy meeting held on november 15 and 16, 2001. the bank ’ s view of recent economic and financial developments, determined by the policy board at the monetary policy meeting held on november 15 and 16 as the basis for monetary policy decisions. 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 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 is moving around zero percent as the bank of japan provided ample liquidity to the money market by aiming at maintaining the current account balances held at the bank at above 6 trillion yen. interest rates on term instruments basically continue to be level. the japan premium remains negligible. yields on long - term government bonds dipped and are recently moving around 1. 35 percent. 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 continue to expand slightly. stock prices continued to be weak, but are recently rebounding. in the foreign exchange market, the yen is currently being traded in the range of 121 - 123 yen to the u. s. dollar. with regard to corporate finance