factors behind such weak developments. one is that the mindset and behavior based on the assumption that wages and prices will not increase easily have been deeply entrenched among firms and households, due mainly to the experience of prolonged low growth and deflation. the other is that the room to raise productivity and the technological progress have allowed firms to absorb a rise in labor costs by increasing labor - saving investment and streamlining their business process, and thereby constrain price rises. on the other hand, although the pace of improvement in prices has remained slow, some changes have been seen amid the improvement in the economic and employment conditions. for example, moves to raise sales prices are starting to be observed at a wide range of firms, mainly in the services sector. according to the tankan, the number of enterprises answering that the output prices have risen has been exceeding the number of those answering that such prices have fallen. also, with the aging of the population, labor market conditions are likely to tighten further and the pace of increase in hourly scheduled cash earnings of part - time employees is expected to accelerate. in addition to such moves, if full - time employees'wages increase with an improvement in productivity, this will lead to an increase in households'tolerance of price rises. while price developments are affected by various factors, i consider that the factor that determines the underlying trend in prices is the aggregate supply - demand balance. as the output gap remains positive, various factors behind the weak developments in prices will likely be resolved gradually. if that happens, firms'wage - and price - setting stance and households'tolerance of price rises will improve, and the pace of increase in inflation expectations will accelerate gradually. iii. conduct of monetary policy let me now turn to the bank's monetary policy. the bank has set the price stability target at 2 percent in terms of the year - on - year rate of change in the cpi and has been conducting monetary policy to achieve this target at the earliest possible time. to this end, the bank has been pursuing powerful monetary easing, considering developments in economic activity and prices, as well as financial conditions, under the framework of quantitative and qualitative monetary easing ( qqe ) with yield curve control introduced in september 2016. the bank, under this framework, has been conducting yield curve control, in which it controls short - and long - term interest rates. specifically, at present, according to the guideline for market operations, the bank sets the short - term policy interest

commodity prices ; namely, crude oil prices. while uncertainties regarding the global economic outlook have been easing, it is likely that commodity - related fixed investment, which has been curtailed over the last few years, will start increasing. i expect there to be a strong possibility of the global economy continuing its steady growth through fiscal 2018. b. japan's economy and price developments 1. current situation now i would like to discuss developments in economic activity and prices in japan. the bank's assessment is that japan's economy is expanding moderately, with a virtuous cycle from income to spending operating. in fiscal 2017 to date, the bank has revised up its economic assessment twice. industrial production has been on an increasing trend, reflecting the increases in demand both at home and abroad, and labor market conditions have continued to tighten steadily. as a result, the output gap - - which captures the utilization of labor and capital - - has improved steadily. on the domestic demand side, business fixed investment has been on a moderate increasing trend with corporate profits and business sentiment improving. according to the september 2017 tankan ( short - term economic survey of enterprises in japan ), business fixed investment plans for fiscal 2017, especially those of large enterprises, showed firms'solid stance. this is evidenced by, for example, the fact that fixed investment on a basis close to gdp definition saw a year - on - year increase of 6. 9 percent - - a level clearly exceeding the past average of 4. 9 percent for the september tankan surveys during the period of fiscal 2004 - 2016. private consumption has increased its resilience against the background of steady improvement in the employment and income situation, and housing investment has been more or less flat. exports have been on an increasing trend on the back of the growth in overseas economies that i mentioned earlier. one of the features of the ongoing expansionary phase is that the economy has been growing across a wide range of regions, firm sizes, and industries in comparison with past expansions. in the latest september 2017 tankan, the diffusion index for business conditions in small firms reached its highest level in almost 26 years. in the regional economic report, many regions have revised their economic assessments upward in 2017. indeed, the kinki region, which includes hyogo prefecture, has revised up its assessment in the two previous reports released in july and october. on the price front, the year - on - year rate of change in the consumer price index ( cpi ) for all