/ 2023 / august - 2023. the outbreak of the pandemic, neither the cpi inflation rate nor the nominal wage growth rate reached even 1 percent in a stable manner. c. the necessity of achieving the 2 percent price stability target taking into account japan's experience just outlined, i consider it necessary for consumer prices to continue to see a steady increase of around 2 percent, so that stable economic growth will continue and people's real wages will keep rising steadily. this is because an excessively low inflation rate that remains at around 0 percent further reinforces the inherently strong rigidity or stickiness of prices and wages, and this can hinder economic efficiency and growth potential. firms'price - setting behavior often reflects a strong tendency to avoid price hikes as far as possible. 3 especially during japan's period of economic stagnation from the 1990s, there were growing instances of price hikes leading directly to sales declines. many firms thus came to prioritize a stance of maintaining selling prices by holding down wage costs. 4 this seems to have caused the zero price and wage norm - - the generally accepted idea that both prices and wages do not usually rise - - to take root thoroughly among firms and households. it is easy to see the strong upward price rigidity taking root in japan by comparing with other advanced economies, where growth in consumer prices has tended to be higher. for example, when comparing the price change distribution by item between japan and the united states, there is a significant difference in both the position of the peak of the distribution and its dispersion, particularly for the pre - pandemic period in september 2019 ( chart 13 ). specifically, in japan, many items cluster around the point where the rate of change in prices is 0 percent, and the degree of concentration is high. by contrast, in the united states, the largest number of items cluster around the rate of increase in prices of about 2 percent, but this phenomenon has long been explained using the concept of a kinked demand curve. the idea behind this is that firms adopt strategies to counter their competitors, so - called strategic complementarity. see koga, m., yoshino, k., and sakata, t., " strategic complementarity and asymmetric price setting among firms, " bank of japan working paper series, no. 19 - e - 5 ( march 2019 ). this corporate behavior can be observed as markdowns. see aoki

the measures best suited to reduce the level of npls further and to gradually and sustainably adjust the level of provisioning will be adopted. account will be taken of the fact that the containment of a credit portfolio ’ s inherent risk must be compatible with the ability to absorb any potential losses from sales. the number and size of firms specialized in credit recovery are increasing, but the level of competition in this sector remains unsatisfactory. some banks have set up ad hoc units. progress in developing a liquid secondary market for npls and advances in the efficacy of recovery procedures depend on a marked improvement in the quality of the information needed for due diligence purposes and the timely monitoring of the status of the procedures. the analytical reporting on bad loans launched two years ago by the bank of italy is making significant strides in this direction. there is still ample room for improvement, however, especially for small banks and with regard to data on real estate appraisals. every effort must be made to catch up. measures to increase the probability that likely - to - fail exposures return to performing status must be stepped up. their success requires different technical skills and operating procedures from those used to manage bad exposures. a market for this type of exposure should also be established and banks should actively seek agreements with turn - around funds to offer firms the managerial and financial resources needed for a re - launch. in recent years there have been improvements in the length of judicial credit recovery proceedings as well. data on the initial phases of foreclosure proceedings indicate that the 2015 - 16 reforms are working towards reducing their duration : the length of the pre - sale phase has fallen by about a tenth ( from 27. 5 to 24. 5 months ), while that of the sale phase has been nearly halved ( from 41. 5 to 23. 5 months ). nonetheless, overall recovery times remain long. additional regulatory reforms may be needed to prevent the accumulation of npls on banks ’ balance sheets and to ensure the necessary flow of loans to households and firms. the enabling law reforming the regulations on corporate crisis and insolvency approved by parliament redistributes the competencies of judicial offices in the context of bankruptcy proceedings in order to increase the level of specialization of judges. it overhauls the courtbased liquidation procedure : priority must be given to significantly reducing the length of the proceedings by simplifying the process and offering appropriate incentives to the parties involved. the judicial system can also be improved by