With regard to the latter, the “own instrument projection” is supposed to be the interest rate path that is best able to achieve the central bank’s objectives under certain model and judgement-based assumptions concerning the functioning of the economy. This approach has the property of being fully consistent with the central bank’s targets and other inputs. However, it also entails several problems.
As for the outlook, upward pressure on prices is likely to arise from the gradual improvement in domestic supply-demand balance and from the rise in crude oil prices. On the other hand, downward 1  This report was written based on data and information available when the Bank of Japan Monetary Policy Meeting was held on 17 May 2000.