and domestic capital markets via corporate and household confidence. with regard to prices, import prices are rising, mainly reflecting the rebound in crude oil prices in addition to the prior depreciation of the yen. domestic wholesale prices are declining mainly due to the decrease in prices of electrical machinery. consumer prices continue to be somewhat weak owing to the decline in prices of imported products and their substitutes. corporate service prices continue to decrease. as for the conditions surrounding price developments, the prior yen depreciation is exerting upward pressure on prices. however, with the ongoing adjustments in economic activities, the balance between supply and demand in the domestic market is likely to exert downward pressure on prices. furthermore, in addition to the declining trend of machinery prices caused by technological innovations, the decreases in the prices of goods and services reflecting deregulation and the streamlining of distribution channels will continue to restrain price developments. overall, prices are expected to be weak for the time being. moreover, given the high degree of uncertainty regarding future economic developments, the possibility that weak demand will intensify downward pressure on prices warrants careful monitoring. this report is based on data and information available at the time of the bank of japan monetary policy meeting held on june 14 and 15, 2001. the bank ’ s view of recent economic and financial developments, determined by the policy board at the monetary policy meeting held on june 14 and 15 as the basis for monetary policy decisions. in the financial market, the overnight call rate is basically moving at about 0. 01 percent under the guideline for money market operations to maintain the current - account balance at the bank of japan at around 5 trillion yen. interest rates on term instruments are level on the whole. the japan premium remains negligible. yields on long - term government bonds recently decreased to 1. 1 - 1. 2 percent after remaining flat at 1. 2 - 1. 3 percent. the yield spreads between private bonds ( bank debentures and corporate bonds ) and government bonds are mostly unchanged or contracting somewhat. stock prices continue to be weak, reflecting the somewhat more cautious views of market participants toward future corporate profits. in the foreign exchange market, the yen appreciated against the u. s. dollar toward early june, but has weakened thereafter and is currently being traded in the range of 120 - 123 yen to the u. s. dollar. with regard to corporate finance, private banks continue to be more active in extending loans, mainly to blue - chip companies, while carefully evaluating

available as of april 2018. 2. prices let me now explain price developments. although the year - on - year rate of change in the consumer price index ( cpi ) for all items less fresh food is in the range of 0. 5 - 1. 0 percent, it has continued to show relatively weak developments compared to the economic expansion and the labor market tightening, remaining at around 0. 5 percent excluding the effects of energy prices. with regard to the outlook, the year - on - year rate of change in the cpi ( all items less fresh food ) is likely to continue on an uptrend and increase toward 2 percent, mainly on the back of the improvement in the output gap and the rise in medium - to long - term inflation expectations. specifically, the medians of the policy board members ’ forecasts of the year - on - year rate of change in the cpi ( all items less fresh food ) presented in the april 2018 outlook report are 1. 3 percent for fiscal 2018 and — on a basis excluding the direct effects of the scheduled consumption tax hike — 1. 8 percent each for fiscal 2019 and 2020. 3 1. 3assuming that the rise in the consumption tax will be fully passed on to prices of taxable items, excluding those to which a reduced tax rate will be applied, the effect of the october 2019 consumption tax hike on the year - on - year rate of change in the cpi ( all items less fresh food ) for october 2019 onward is estimated to be 1. 0 percentage point ; the effect for fiscal 2019 and 2020 is estimated to be 0. 5 percentage point for each year. it also is assumed that the effects of policies concerning the provision of free education will not be reflected in the cpi, as statistical treatment of these effects is not yet decided. ii. keys to assessing the outlook for economic activity and prices in what follows, i would like to discuss several points that i think deserve particular attention in terms of realizing the outlook for economic activity and prices that i mentioned earlier. a. supply - demand conditions in the labor market and the income situation let me first talk about supply - demand conditions in the labor market and the income situation. as 2 / 5 bis central bankers'speeches the economy has continued its moderate expansion, the output gap has continued to improve ; the figure for the october - december quarter of 2017 — the most recent data available – was in positive territory of around 1. 5 percent. furthermore, supply - demand conditions in the labor market