Employment and income are showing moderate but steady improvement, and bonus payments in summer 1997 are likely to enjoy a sizable rise. While personal consumption will inevitably be affected by the rise in the consumption tax rate and by the discontinuation of the special tax reduction, it is unlikely that the trend of recovery will be hampered considering the improvements in the income environment.
The low rates of wages growth are contributing to relatively low rates of inflation in the services sector. Rent inflation is also the lowest it has been in decades. And various government initiatives to ease cost-of-living pressures are contributing to lower increases in many administered prices. Together, these factors have led to a low rate of inflation for non-traded goods and services (Graph 11).