has been that ( 1 ) given the extremely accommodative financial conditions, the level of interest rates is to be raised if japan's economy is to follow a path of sustainable growth under price stability, and ( 2 ) the pace of increase in interest rates should be determined in accordance with improvements in the economic and price situation without any predetermined view. so far, weak inflationary pressures have given the bank latitude in conducting monetary policy. the actual interest rate adjustments have therefore been slow based on a thorough assessment of the future path of the economy and prices and its likelihood, as well as both upside and downside risks. the bank's basic thinking in this regard will remain the same in the conduct of future monetary policy. that is, while confirming that the japanese economy remains likely to follow a path of sustainable growth under price stability and assessing relevant upside and downside risk factors, the bank will adjust the level of interest rates gradually in accordance with improvements in the economic and price situation. we believe that, from the long - term perspective, the conduct of monetary policy in such a manner will prevent the risk of larger swings in economic activity and prices from materializing and will help to realize sustainable growth under price stability. conclusion japan's economy is expanding moderately. corporate activity has been increasing due partly to strong exports, as can be seen here in the kansai region, and the positive influence is clearly spreading throughout the wider economy as evident in the declining unemployment rate. in order for japan's economy to continue sustainable growth in the face of various challenges including the declining population, it is crucial for all regions and industries to persist with their efforts to innovate. since, along with the kanto and tokai regions, the kansai region is pulling japan's economy forward, i fully anticipate that your originality and inventiveness will continue to play a leading role. as for the bank, we will continue to support your efforts through our conduct of monetary policy.

overseas ( chart 8 ). funding costs for japanese firms have been at extremely low levels, even as overseas interest rates have increased significantly. firms'funding demand for working capital has increased recently in reflection of the resumption of economic activity and raw material cost increases. in this situation, financial institutions have maintained an active lending stance and firms'financial positions have continued on an improving trend, including for small and medium - sized firms. ii. price developments i will now turn to price developments in japan. the latest figure for the year - on - year rate of change in the cpi for all items excluding fresh food, which is for september, was 3. 0 percent due to rises in prices of such items as energy, food, and durable goods ( chart 9 ). the rate of change is projected to increase further toward the end of the year, partly because prices of a wide range of products were raised in october, which starts the second half of the fiscal year in japan. the cause of the rising inflation rate is that cost increases due to a rise in import prices, which reflects higher international commodity prices and the yen's depreciation, have been passed on to prices of items. that said, the inflation rate is expected to decelerate gradually from the beginning of next year. international commodity prices are lower than a while ago, and the effects of the pass - through to consumer prices of cost increases led by the rise in import prices are likely to wane. the bank forecasts that the rate of change in the cpi will be at around 3 percent for this fiscal year but then around 1. 5 percent from fiscal 2023. projections that inflation will fall below 2 percent are made not only by the bank but also by others, including the imf and private - sector economists ( chart 10 ). of course, as with the outlook for economic activity, the outlook for prices is subject to high uncertainties, including developments in international commodity prices and foreign exchange rates, both of which have brought about upward pressure of costs to date. in addition, although japanese firms had long been cautious about raising prices, those for a wide range of products have been raised recently. close attention to firms'price - setting behavior going forward is warranted. how firms'wage - setting behavior will evolve is also important. in this regard, it is projected that labor market conditions will tighten as the output gap improves ( chart 11 ). in particular, labor demand in the services industry is expected to recover