. 5 2. 0 1. 5 y / y % chg. mobile phone charges effects of the " go to travel " campaign effects of the consumption tax hike and free education policies energy excluding the above factors cpi ( less fresh food ) 1. 0 0. 5 0. 0 - 0. 5 - 1. 0 - 1. 5 - 2. 0 cy 17 notes : 1. figures for energy consist of those for petroleum products, electricity, as well as manufactured and piped gas charges. 2. figures for the " effects of the consumption tax hike and free education policies " from april 2020 onward are bank staff estimates and include the effects of measures such as free higher education introduced in april 2020. source : ministry of internal affairs and communications. chart 9 capital stock cycles and expected growth rates business fixed investment, y / y % chg. investment - capital stock ratio at the end of fy 2020 fy 2021 - 5 1. 5 % 1 % 0. 5 % 0 % - 10 expected growth rate : - 2 % - 1 % - 15 9. 5 10. 0 10. 5 11. 0 11. 5 12. 0 12. 5 13. 0 investment - capital stock ratio at the end of the previous fiscal year, % note : each broken line represents the combination of the rate of change in business fixed investment and the investment - capital stock ratio at a certain expected growth rate. the figure for fiscal 2021 is the 2021 / q2 - q4 average. source : cabinet office. chart 10 output and input prices ( tankan ) manufacturing nonmanufacturing di ( " rise " - " fall " ), % points - 20 - 20 - 40 - 40 - 60 cy 74 - 60 cy 74 di ( " rise " - " fall " ), % points note : figures are for all enterprises. source : bank of japan. chart 11 monetary policy guideline for market operations under yield curve control the bank's measures in response to covid - 19 short - term policy interest rate : applying a negative interest rate of minus 0. 1 percent to the policy - rate balances in current accounts held by financial institutions at the bank supporting corporate financing long - term interest rate : purchasing a necessary amount of jgbs without setting an upper limit so that 10 - year jgb yields will remain at around zero percent special funds - supplying operations to facilitate financing in response to the novel coronavirus ( covid - 19 ) ( mainly targeting small and medium

bank of japan ’ s august report of recent economic and financial developments1 bank of japan, communication, 15 august 2000. * * * the bank ’ s view2 japan ’ s economy is recovering gradually, with corporate profits and business fixed investment continuing to increase. with regard to exogenous demand, net exports ( real exports minus real imports ) continue to follow a moderate upward trend due to steady developments in overseas economies, and public investment remains at a high level reflecting the progress in the implementation of the supplementary budget for fiscal 1999. as regards domestic private demand, business fixed investment is increasing. the recovery in private consumption continues to be weak as a whole through lack of notable improvements in employment and income conditions, although there are somewhat positive signs in some indicators. housing investment is mostly unchanged. reflecting such developments in final demand, industrial production is increasing. corporate profits and sentiment continue to improve, and the number of firms that take positive action, such as increasing the amount of fixed investment, is increasing, especially in high - growth sectors. income conditions of households still remain severe, but regular and overtime payments as well as new job offers continue to increase in line with the recovery in corporate activities, and compensation of employees has stopped decreasing. as for the outlook, public investment is likely to start decreasing in the near future, but net exports are expected to continue increasing gradually, reflecting the expansion in overseas economies. in the corporate sector, firms still strongly feel that they have excess equipment and that they should reduce their debts to restore financial soundness. however, it is very likely that fixed investment in highgrowth sectors, including those related with information technology services, will increase as corporate profits continue to recover. moreover, an improvement in corporate profits will increase household income and this in turn is expected to boost private consumption. however, the pace of recovery in household income will be modest for the time being, since firms ’ perceptions of excess employment still persist, and thus significant changes have not been observed in their efforts to reduce personnel expenses. overall, the economy is likely to recover gradually, led mainly by business fixed investment, unless there are major adverse external shocks. in addition, the favorable financial environment created partly by the bank ’ s sustaining easy monetary stance is expected to continue underpinning the economy. with regard to prices, import prices are rising, reflecting an increase in international commodity prices such as crude oil prices since april. domestic wholesale prices, notwithstanding the rise in prices of petroleum products reflecting the increase in crude oil prices,