yen to date. as a result, the real trade surplus turned to an increase in the second half of 1996. the nominal current - account surplus, however, is increasing at a much slower pace compared to the real trade surplus owing to the fluctuations in the income account and the hike in crude oil prices. industrial production showed a significant increase in january 1997 after it increased by a seasonally - adjusted annual rate of over 10 per cent in the fourth quarter 1996. this increase was caused by the rise in final demand, particularly in those items conducive to production, such as passenger car sales, machinery investment, and net exports, under the circumstance in which inventories has been at appropriate levels. although industrial production is expected to decline in february and march, the figure for the first quarter 1997 on average is also expected to show a steady increase. labor market conditions have continued to improve moderately on the whole. although the unemployment rate remains at a high level and employment growth has been moderate, growth in nominal wages has accelerated, reflecting the increase in production and corporate profits. the ratio of job offers to job applications has continued to improve. with respect to price developments, domestic wholesale prices ( adjusted for seasonal electricity rates ) have stopped declining, although downward pressures such as from competition with imports and technological innovation in, e. g., electrical machinery, remain strong. this development has been supported by the yen ’ s depreciation to date, the hike in crude oil prices and the moderate improvement in domestic supply and demand conditions. corporate service prices have declined, particularly in rents and leasing charges, but the year - to - year decrease has become smaller. consumer prices ( nationwide, excluding perishables ) have somewhat exceeded the level of the previous year, as the decline in commodity prices has slowed against the background of the yen ’ s depreciation and the halt in the decline in domestic wholesale prices. growth in monetary aggregates, measured in terms of the year - to - year growth rate of m2 + cds average outstanding, has continued at 3. 0 - 4. 0 per cent, as corporate demand for funds has been increasing at a moderate pace. regarding money market rates, the overnight call rate ( uncollateralized ), together with the 3 - month cd rate, has moved at a low level albeit with small fluctuations. meanwhile, 3 - month euro - yen futures have shown relatively minor movements at around 0. 7 - 0. 8 per cent after market ’ s expectations for higher

interest rates receded at a brisk pace between summer and autumn 1996. in these circumstances, the long - term government bond yield has moved at about 2. 3 - 2. 4 per cent since the end of november 1996, but has recently declined to reach a record low of around 2. 2 per cent. with respect to bank lending rates, the short - term prime lending rate has remained at a record low level of 1. 625 per cent since september 1995. the long - term prime lending rate was lowered three times by a total of 0. 8 percentage points since september 1996 in response to developments in the long - term interest rates, and has been moving at the record low of 2. 5 per cent since december 1996. in these circumstances, short - term and long - term average contracted interest rates on new loans and discounts have moved at near record low levels. on the stock exchange, the nikkei 225 stock average plummeted temporarily between the end of 1996 and the beginning of 1997, reflecting the market ’ s concerns about japan ’ s economic outlook and balance - sheet problems. it has since picked up somewhat. in the foreign exchange market, the yen depreciated to reach ¥124 - 125 against the u. s. dollar temporarily in february 1997 owing to such factors as the interest rate differentials between japan and the united states. recently, the yen has moved at around ¥122 - 123 as concerns about the rapid appreciation of the u. s. dollar strengthened somewhat in the market. meanwhile, the yen has been appreciating against the deutsche mark since mid - february and recently moved at around ¥72 - 73.