the decline in stock prices and of irregular weather ; however, the cai has picked up recently. as the employment and income situation has continued to improve, factors such as the wealth effects resulting from a rise in stock prices and the dissipation of the effects of irregular weather are considered to be supporting the pick - up in the cai. with regard to the outlook, private consumption is expected to increase moderately, supported by a steady improvement in employee income, as well as the wealth effects stemming from a rise in stock prices and the effects resulting from the set of stimulus measures. c. business fixed investment let me now explain developments in business fixed investment, which has been on a moderate increasing trend as corporate profits have improved. according to the december 2016 tankan, firmness has continued to be seen in business fixed investment plans for fiscal 2016 as a whole, although developments such as delays in the construction progress and postponement of opening new shops, both triggered by labor shortages, have been observed in some small nonmanufacturing firms. as for the outlook, business fixed investment is likely to continue to see a moderate uptrend, mainly on the back of ( 1 ) an improvement in corporate profits, ( 2 ) extremely stimulative financial conditions, such as low interest rates and accommodative lending attitudes, ( 3 ) the effects of fiscal measures including projects conducted under the fiscal investment and loan program and tax reductions for capital investment, and ( 4 ) moderate improvement in growth expectations. d. prices next, i will discuss inflation expectations and the output gap, which are the main factors that determine inflation rates. first, medium - to long - term inflation expectations have remained in a weakening phase since summer 2015 as the adaptive formation mechanism has played a large role, reflecting the observed inflation rate having been slightly negative. as for the outlook, firms'price - setting stance is expected to revert to raising prices as private consumption is expected to continue increasing moderately, and their wage - setting stance is likely to shift toward raising wages driven by the tightening of labor market conditions ; against this backdrop, medium - to long - term inflation expectations are likely to follow a sustained increasing trend. second, the output gap had been more or less unchanged at around 0 percent, but has shown some improvement recently. it is projected that it will turn slightly positive toward the end of fiscal 2016, and from fiscal 2017 continue expanding moderately in positive territory owing to both the capital and labor factors, as domestic and

of emerging economies other than china and commodity - exporting economies are likely to increase gradually, due mainly to the effects of the economic stimulus measures and the spread of the effects of steady growth in advanced economies. risk factors to the overseas economic outlook are wide ranging, as exemplified by developments in the u. s. economy and the impact of its monetary policy on global financial markets, ( 2 ) developments in emerging and commodity - exporting economies, particularly china, ( 3 ) the consequences stemming from the united kingdom's vote to leave the european union ( eu ) and their effects, ( 4 ) prospects regarding the european debt problem, including the financial sector, and ( 5 ) geopolitical risks. therefore, i consider it necessary to closely monitor various risk factors from a broad perspective in making projections regarding overseas developments. b. japan's economy and prices 1. economic activity i will now discuss the economic situation in japan given the overseas developments i have just outlined. japan's economy has continued its moderate recovery trend. on an annualized quarter - on - quarter basis, the real gdp growth rate for the october - december quarter of 2016 registered 1. 2 percent, representing an increase for four consecutive quarters. the rate continued to rise, due mainly to an increase in external demand, although domestic demand was somewhat sluggish. with regard to the outlook, japan's economy is likely to turn to a moderate expansion. domestic demand is likely to follow an uptrend, with a virtuous cycle from income to spending being maintained in both the corporate and household sectors, on the back of highly accommodative financial conditions and fiscal spending through the government's large - scale stimulus measures. meanwhile, exports are expected to follow a moderate increasing trend as the growth rates of overseas economies increase moderately. according to the bank's january 2017 outlook for economic activity and prices ( hereafter the outlook report ), the medians of the policy board members'forecasts for the economic growth rate are 1. 4 percent for fiscal 2016, 1. 5 percent for fiscal 2017, and 1. 1 percent for fiscal 2018, and the economy is expected to continue growing at a pace above its potential through the projection period of fiscal 2016 - 2018. 1 2. prices next, i will talk about price developments. the year - on - year rate of change in the consumer price index ( cpi ) for all items less fresh food has increased, reflecting a rise in energy prices, and has