The July 2018 Outlook Report showed that households' tolerance of price rises has not been increasing and that firms' wage- and price-setting stance has not strengthened enough, even amid rising costs.1 Economic activity based on these conditions is not sustainable in the long run, although it is difficult to change in the short run; thus, if the expanding trend of the output gap continues to strengthen, economic activity will gradually become proactive, and the burden of price stagnation will be lessened.
Firms’ borrowing rates from banks have continued to decline due in part to the fact that financial institutions’ lending stance has become active, in addition to monetary easing by the Bank. Issuing conditions for CP are more favorable than in the period prior to the Lehman shock.