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.
Thus, the virtuous circle, generated by a recovery in private demand, is still at work. The Bank is, therefore, of the view that the current slowdown in demand will only be temporary and that it is likely that the economic recovery will continue. It is, however, necessary to continue to monitor closely consumer behavior and business activity.