recently ( chart 7 ). the amount of corporate bonds issued in the april - june quarter registered the largest level since the lehman shock. in terms of funding costs, bank lending rates, in terms of the average contracted interest rates to businesses and households, have continued to decline and remain at historically low levels. c. favorable turn in expectations the second favorable turn is that in the public ’ s sentiment and expectations. bis central bankers ’ speeches first of all, consumer sentiment has been improving markedly ( chart 8 ). according to the consumer confidence survey, which is a questionnaire survey on consumer perception conducted by the cabinet office, while there is discontinuity due to the change in the survey method, the di has improved to a pre - lehman shock level. by generation, sentiment improved not only among the elderly, who hold large amounts of stocks and are likely to benefit from stock price rises, but also for young people. it appears that expectations for improvement in economic activity and income have started to emerge across a wide range of generations. on top of this, business sentiment has also been improving ( chart 9 ). the di for business conditions ( all industries, all enterprises ) in the june tankan survey improved by 6 percentage points from the march survey to reach minus 2. it has now reached a level as high as that registered in the december 2007 survey. moreover, the number of industries responding that business sentiment has improved has also increased, and now stands at 26 out of 31 industries. lastly, the public ’ s inflation expectations are rising. looking at various indicators related to businesses, the di for output prices in the june survey improved irrespective of firm size and category ( chart 10 ). the forecast di of large firms has now come close to zero. this has happened only twice in the last 30 years – once toward the end of the bubble period and the other just before the lehman shock, when international commodity prices surged. as far as indicators related to households are concerned, according to the opinion survey on the general public ’ s views and behavior, the share of respondents who expected that prices will go up one year from now exceeds 80 percent ( chart 11 ). a number of surveys collecting views among economists also indicate that the expected rate of inflation is rising. with regard to market indicators, break - even inflation – that is, the yield spread between fixed - rate coupon - bearing jgbs and inflation - indexed jgbs, and representative of the expected rate of inflation in

potential – which is considered to be around 0. 5 percent – as a trend, as a virtuous cycle among production, income, and spending operates. in terms of the median of the bank ’ s policy board members ’ forecasts of the growth rates, this is 2. 8 percent for fiscal 2013, 1. 3 percent for fiscal 2014, and 1. 5 percent for fiscal 2015, averaging almost 2 percent ( chart 16 ). the year - on - year rate of change in the cpi, excluding the direct effects of the consumption tax hikes, is likely to follow a rising trend, mainly reflecting an improvement in the aggregate supply and demand balance as well a rise in the expected rate of inflation. in terms of the median of the policy board members ’ forecasts of prices, the year - on - year rate of change in the cpi is expected to be 0. 6 percent for fiscal 2013, 1. 3 percent for fiscal 2014, and 1. 9 percent for fiscal 2015. it is highly likely to reach the price stability target of about 2 percent toward the latter half of the bank ’ s projection period through fiscal 2015. three key factors toward realizing the outlook for the above outlook to materialize, there are three key factors ( chart 17 ). first, the sustainability of firmness in domestic demand. it is important that the aforementioned current improvement in business and household sentiment lead to sustained spending in tandem with an increase in income. in the corporate sector, a virtuous cycle from income to spending appears to be gradually starting to operate. in terms of “ income, ” corporate profits have been improving, and in terms of “ spending, ” the june tankan survey results revealed solid business fixed investment plans. since the lehman shock, firms have long restrained business fixed investment, and thus there seems to be large potential demand, mainly for maintenance and repair as well as replacement of existing equipment. as for the outlook, business fixed investment is likely to follow a moderate increasing trend, and we will confirm this with the actual data to be released. in the household sector, despite the absence of a marked increase in labor income, private consumption has been resilient, mainly due to an earlier improvement in consumer sentiment and wealth effects brought about by the rise in stock prices. hereafter, it is important that the increase in private consumption and housing investment continue, backed by firmness on the “ income ” front, such as an improvement in employment and wages. in this regard, the