This was the highest rate in 15 years excluding fiscal 1997, when CPI inflation increased reflecting the rise in the rate of consumption tax. Japan currently faces a difficult situation given the sluggishness in the economy and the rise in prices.
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.