Consumer prices have increased above the previous year’s level due to the rise in prices of perishables. Excluding this temporary effect, consumer prices basically remain weak. As for the outlook, although public investment is expected to increase, distinct narrowing in the output gap is hardly expected toward the first half of 1999, as private demand is likely to remain sluggish.
Furthermore, the decline in wages and the appreciation of the yen since autumn 1998 are likely to continue exerting downward pressure on prices. Hence, prices are expected to remain on a downtrend. 1  This report was written based on data and information available when the Bank of Japan Monetary Policy Meeting was held on February 12, 1999.