the market – rose rapidly toward mid - may. while it has declined thereafter, breakeven inflation has clearly heightened compared with the beginning of the year ( chart 12 ). based on these developments in the various indicators, it can well be judged that inflation expectations on the whole are picking up. d. favorable turn in economic activity and prices the third favorable turn is in economic activity and prices reflecting the improvement in financial markets and the public ’ s sentiment. private consumption remains resilient on the back of sharp improvement in household sentiment and the wealth effect from the stock market rally ( chart 13 ). as i mentioned earlier, in addition to spreading favorable expectations for the economic outlook, given that the cohort of the senior generation that holds a large amount of stocks tends to enjoy a higher propensity to consume – that is, they have an inclination to spend more money – than other generations, it is likely that a stronger wealth effect from the stock market rally is at work. business fixed investment has stopped weakening as business sentiment and corporate profits have improved, and it is showing some signs of picking up ( chart 14 ). indeed, in the june tankan survey, the projections for fiscal 2013 show that firms intend to increase investment steadily on the back of improvement in sales and current profits. on the price front, while the year - on - year rate of change in the cpi ( all items excluding fresh food ) had been negative, it reached 0 percent in may and turned positive in june, at 0. 4 percent, reflecting improvement in the economy and the yen ’ s depreciation ( chart 15 ). in sum, there have been favorable turns in financial conditions, in expectations, and in economic activity and prices. all these developments suggest that the aim of the qqe – to lead japan ’ s economy toward overcoming the deflation that has lasted for nearly 15 years – is right on track so far. bis central bankers ’ speeches ii. the outlook for economic activity and prices ( an interim assessment of the outlook report ) next, i will move to the outlook for japan ’ s economy. as for the baseline scenario, the economy is expected to recover moderately on the back of the resilience in domestic demand and the pick - up in overseas economies. while the economy is likely to be affected from next year onward by the front - loaded increase and subsequent decline in demand prior to and after the two scheduled consumption tax hikes, it is likely to continue growing at a pace above its

. do the wage settlements create really good conditions for increased employment and has a foundation been laid for further responsible wage settlements in the next negotiating round in two to three years time? some positive things in the swedish economy have also happened in recent years as regards competitive conditions and price formation. with the ongoing process of internationalisation, european monetary union and advances in the it field, there is likely to be a further intensification of competition and downward pressure on prices, to the benefit of swedish consumers. but there is cause to consider whether more can be done, which if there is would also assist monetary policy. finally i considered aspects of monetary policy and the current situation in this respect. in the past six months inflation prospects have improved. like many central banks in central europe, the riksbank has accordingly moved from a situation that pointed to the likelihood of a relatively quick succession of continued interest rate increases to one where the need of higher interest rates in the near future seems to have disappeared. with the bright inflation prospects and a strict interpretation of the riksbank ’ s rule for monetary policy decisions, today there may even be grounds for considering a minor downward repo rate adjustment. what the riksbank now has reason to consider is whether such an adjustment would lead to good conditions for stable economic development in the future. * * * gdp growth 1980 - 1997 index : 1980 = 100, seasonally adjusted trend : 1993 - 97 trend : 1985 - 90 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 sources : ecowin and the riksbank budgetbalance : sweden and eu - average per cent of gdp, 1998 - 1999 forecast by ni and oecd - 2 - 4 - 6 - 8 - 10 - 12 - 14 - 2 - 4 - 6 - 8 - 10 - 12 - 14 sweden eu - average sources : oecd and national institute of economic research ( ni ) wage curve : sweden and eu area wage / employee, annual percentage change, 1998 - 1999 forecast by oecd sweden eu - area 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 source : oecd inflationexpectations of labour market organisations per cent 4. 5 4. 0 3. 5 3. 0 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 - 0. 5 jan - 95 feb - 96 nov - 97 feb - 98 may - 98 4.