##elerate gradually because the outlook factors in the government's economic measures and their waning effects, in addition to a weakening contribution from pent - up demand. there are extremely high uncertainties regarding the outlook. those that especially warrant attention are ( 1 ) developments in overseas economic activity and prices and in global financial and capital markets, ( 2 ) developments in the situation surrounding ukraine and their effects on the price of commodities, including grain, and ( 3 ) the impact of covid - 19 on the economy. in view of these factors, while there are upside and downside risks to the outlook, the bank assesses that risks are skewed to the downside for the time being. b. price developments turning to japan's price developments, the year - on - year rate of increase in the consumer price index ( cpi ) for all items less fresh food was 4 percent for december 2022 ( chart 8 ). in addition to higher energy prices, for goods, the pass - through of cost increases to selling prices has intensified for a wide range of items, especially food, daily necessities, and durable goods. the rate of increase in general services prices has also accelerated against the backdrop of an intensified pass - through of raw material costs, mainly for housework - related services, including services related to housing repairs and maintenance, as well as dining - out. such price increases have been triggered by a rise in import prices, reflecting high commodity prices and the yen's depreciation. however, what is distinctive about the current phase is the change in firms'price - setting stance. in japan, it had been difficult for firms to pass on cost increases to selling prices even when faced with a rise in input prices. however, this situation has started to change : firms - - even those that had taken a cautious stance toward changing their selling prices - - have sought price hikes, while their pricing decisions have been made in consideration of price setting by competitors ( chart 9 ). furthermore, according to the tankan ( short - term economic survey of enterprises in japan ), firms'outlook for output prices of their products for one year ahead has been higher than that for general prices in the most recent surveys. these mark the first time this has been observed since the launch of the survey in 2014, which can be viewed as indicating that firms'stance has shifted toward actively raising their selling prices. the rate of increase in the cpi is expected to decelerate toward the

., % output gap ( left scale ) cpi ( less fresh food and energy, right scale ) - 2 - 1 - 4 - 2 - 6 - 3 - 8 cy07 - 4 s. a., % unemployment rate ( left scale ) labor force participation rate ( right scale ) cy07 note : in the left - hand chart, cpi figures are bank staff estimates and exclude mobile phone charges and the effects of the consumption tax hikes, policies concerning the provision of free education, and travel subsidy programs. figures for the output gap are bank staff estimates. sources : ministry of internal affairs and communications ; bank of japan. chart 14 prices and labor - management wage negotiations y / y % chg. actual base pay increase base pay increase demanded by labor unions cpi inflation - 1 - 2 cy 91 notes : 1. figures for cpi inflation are for all items less fresh food, excluding the effects of the consumption tax hikes, etc. 2. figures for actual base pay increase from 1991 to 2013 are those published by the central labour relations commission, while those from 2014 to 2022 are figures released by rengo. figures for the base pay increase demanded by labor unions before 2023 are calculated by subtracting seniority - related wage increases from the total increase in wages demanded. the figure for 2023 is from rengo's policy for the spring 2023 wage negotiations. sources : central labour relations commission ; japanese trade union confederation ( rengo ) ; ministry of internal affairs and communications. chart 15 modification of the conduct of yield curve control ( ycc ) impact of increased volatility in overseas markets deterioration in japan's bond market functioning relative relationships among interest rates of bonds with different maturities arbitrage relationships between spot and futures markets possibility of a negative impact on financial conditions yields on jgbs are reference rates for corporate bond yields, bank lending rates, and other funding rates. jgb yield curve ( before the december 2022 mpm ) 1. 6 % 1. 4 measures decided by the bank of japan conduct of ycc encourage a smoother formation of the entire yield curve significant increase in the amount of jgb purchases : from 7. 3 trillion yen per month to about 9 trillion yen per month expansion of the range of 10 - year jgb yield fluctuations from the target level : from around [UNK]. 25 % pts to around [UNK]. 5 % pts nimble responses for each maturity : - offer to purchase 10 - year jgbs at 0