However, substantial narrowing in the output gap led by a recovery in private demand is unlikely for the time being, and wages continue to decline. Thus, downward pressure on prices is expected to remain. In the financial market, the overnight call rate has stayed at nearly zero and financial institutions have been confident about the availability of overnight funds.
As for interest rates on term instruments, short-term rates such as those of three months have weakened. However, longer-term rates maturing beyond the year-end continue to be relatively high partly due to market participants’ concern over the Year 2000 problem. The Japan premium has continued to be nearly zero for short-term transactions.