This situation has been caused by two factors: the surge in energy and materials prices; and the disruptions in global financial markets stemming from the U.S. subprime mortgage problem, and the slowdown in the global economy. II. The surge in energy and materials prices and Japan's economy  First, I will address a topic related to the surge in energy and materials prices.
A rise in such prices exerts downward pressure on Japan's economy, which depends heavily on imports of resources, through a decrease in purchasing power – an outflow of income. At the same time, it exerts upward pressure on prices. Let us look back on the two oil crises Japan previously faced.