The BoJ said overall prices will be somewhat weak for the time being due to a fall in consumer goods prices, the streamlining of distribution channels, reduced communications charges on deregulation, and falling crude oil prices.
Despite the upward pressure on prices from the recent fall in the yen, the balance between supply and demand in the domestic market is projected to be on a gradual improving trend due to the expected moderate economic recovery, it said.
Overall inventories remain at a low level, even though those of some materials and electrical parts have become somewhat excessive due to demand from overseas declining significantly, the bank said. The overnight call rate is generally moving around 0.25 pct, while yields on long-term government bonds have declined to around 1.40-1.45 pct, with yield spreads between corporate and government bonds mostly unchanged or expanding only somewhat.