oil prices. domestic wholesale prices are levelling off due to the progress in inventory adjustment as well as an increase in prices of some products closely related to international commodities, such as those of petroleum products. consumer prices continue to be unchanged. corporate service prices are still falling, although the pace of the decline is slowing. as regards the movements of overall prices in the future, they are likely to be flat, this report was written based on data and information available when the bank of japan monetary policy meeting was held on 13 october 1999. the bank ’ s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on 13 october as the basis of monetary policy decisions. as the rise in crude oil prices to date will continue to be passed on to prices of other products for a while. however, substantial narrowing in the output gap led by a recovery in private demand is unlikely for the time being, and wages continue to decline. thus, downward pressure on prices is expected to remain. in the financial market, the overnight call rate has stayed at nearly zero, and financial institutions have been confident about the availability of overnight funds. as for interest rates on term instruments, short - term rates maturing before the year - end have been moving at a historically low level. meanwhile, rates maturing beyond the year - end are relatively high due to market participants ’ concern over the year 2000 problem. the japan premium has continued to be nearly zero for short - term transactions, but a small premium has been observed for transactions maturing beyond the year - end. yields on long - term government bonds declined from late august to the level of around 1. 6 percent. they rose somewhat thereafter and have recently been moving between 1. 7 and 1. 8 percent. the yield spread between government bonds and private bonds ( bank debentures and corporate bonds ) has been stable and noticeably smaller than before. stock prices fell below the 17, 000 yen level in late september against the background of the weak tone in u. s. stock prices and the rapid appreciation of the yen, but subsequently rebounded reacting to the recovery in u. s. stock prices and the restoration of stability in the foreign exchange market. the prices are presently moving around 18, 000 yen. in the foreign exchange market, the yen surged against the u. s. dollar and reached the 103 – 104 yen level in the middle of and late september, but then declined to the current level of 106 — 108 yen to

the dollar. the amount outstanding of funds in the call money market has remained generally stable since the middle of june. to date, this has not led to any difficulty in funds settlement, but close attention should be paid to future market developments. with regard to corporate finance, private banks have basically retained their cautious lending attitude. however, constraint that had been caused by severe fund - raising conditions and insufficient capital base has eased considerably. under these circumstances, major banks have gradually become more active than before in extending loans, while carefully evaluating the credit risks involved. however, credit demand for economic activities such as business fixed investment remains weak. in addition, some firms have been trying to reduce debts using their on hand liquidity. as a result, credit demand in the private sector has continued to be weak, and thus private banks ’ lending has remained sluggish. meanwhile, issuance of corporate bonds and cp has recently been steady. the year - to - year growth rate of money stock ( m2 + cds ) has declined to around 3. 5 percent mainly due to the weakness in credit demand in the private sector. in this financial environment, credit conditions have eased somewhat. the following continue to warrant careful monitoring : how actively investors will take risks ; how far private banks will ease their lending stance ; and how these changes will affect economic activities.