The significant deterioration in the terms of trade has weakened corporate profits and household real income and exerted downward pressure on domestic private demand. The second reason is the slowdown in overseas economies. Japan's exports in real terms showed high growth until this spring, but later decelerated and have leveled off recently.
Growth in exports to the United States has been sluggish since the end of 2006, but that of exports to Europe and Asia has also recently started to slow.