of qqe, it became positive in autumn 2013 and has remained in positive territory for over three years. japan's economy is no longer in deflation, which is generally defined as a sustained decline in prices. nevertheless, it is true that there is still a long way to go to achieve the bank's price stability target of 2 percent. the year - on - year rate of increase in the cpi for all items less fresh food and energy has remained on a decelerating trend since the beginning of 2016 ; thereafter, the rate of change has been fluctuating. this is attributable to a slowdown in firms'price hikes reflecting sluggish private consumption, and to price declines such as in durable goods, due mainly to the yen's appreciation last year. from a longer - term perspective, people's inflation expectations also have declined, following the course of the observed inflation rate, which has continued to show somewhat weak developments with the decline in crude oil prices that has lasted for about two and a half years. outlook for prices while recent price developments have been somewhat sluggish, the bank judges that the momentum toward achieving the price stability target of 2 percent is maintained. specifically, the year - on - year rate of change in the cpi for all items less fresh food is likely to increase from about 0 percent and become slightly positive, reflecting a bottoming out of crude oil prices, and thereafter is expected to increase toward 2 percent. the timing of the year - on - year rate of change in the cpi reaching around 2 percent will likely be at the end of the projection period of the outlook report - - that is, around fiscal 2018. this outlook for prices is unchanged from that presented in the october 2016 outlook report. going forward, the inflation rate is expected to rise through the following mechanism. first, the output gap has improved steadily, as evidenced by the tightening of labor market conditions, and this will lead to a rise in the inflation rate through wage increases and other channels. second, a pick - up in commodity prices, including crude oil prices, and the yen's depreciation are expected to push up consumer prices. third, along with these developments, people's medium - to long - term inflation expectations are likely to rise. the tightening of labor market conditions brings about upward pressure on wages. the bank aims to achieve a situation where the inflation rate increases moderately, accompanied by rises in corporate profits and wages. the past data

decrease in prices of electric machinery. meanwhile, consumer prices continue to be somewhat weak owing to the decline in prices of imported products reflecting the past appreciation of the yen, although prices of petroleum products and electricity increased from the rise in crude oil prices. corporate service prices are still falling slowly. this report was written based on data and information available when the bank of japan monetary policy meeting was held on 14 september 2000. the bank ’ s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on 14 september as the basis of monetary policy decisions. as for the outlook on prices, downward pressure on prices stemming from weak demand is declining significantly while an economic recovery is expected to continue moderately. upward pressure on prices is likely to arise temporarily from the increase in crude oil prices. on the other hand, in addition to the declining trend of machinery prices due to technological innovations, the decline in prices of consumer goods arising from the past appreciation of the yen and the streamlining of distribution channels will exert downward pressure on prices. thus, prices overall are expected to be stable or weak somewhat. in the financial market, the overnight call rate rose in response to the decision at the monetary policy meeting held on 11 august to change the guideline for money market operations, 3 and is generally moving around 0. 25 %. the amount of funds outstanding in the call money market has increased. interest rates on term instruments increased towards the end of august, reflecting the termination of the zero interest rate policy, and has been mostly stable thereafter. the japan premium remains negligible. yields on long - term government bonds followed an upward trend from the second half of august and rose temporarily to 1. 95 - 2. 0 %, but is recently moving in the range of 1. 8 - 1. 9 %. the yield spread between private bonds ( bank debentures and corporate bonds ) and government bonds remains mostly unchanged as a whole. stock prices rose from mid - to end - august but started to fall from late august and are recently moving around the level observed during mid - august. in the foreign exchange market, the yen - dollar exchange rate rose temporarily to around 109 - 110 yen in mid - august, but the yen appreciated thereafter. the yen is currently being traded in the range of 106 - 108 yen to the us dollar. with regard to corporate finance, private banks continue to be more active in extending loans mainly to blue - chip companies, while carefully evaluating the credit risks involved