Contrarily, during the second oil crisis, the economy continued to grow at a rate of 3-5 percent and the CPI posted only a single-digit increase. Of the various factors behind the difference in Japan's economic and price performance between the two oil crises, two seem to be most important.
The first factor was the difference in the economic and price situation immediately before the crises as well as the policy response. Already prior to the first oil crisis, the economy was overheated and the financial environment was overly accommodative, having increased the inflation expectations of households and firms. Against this background crude oil prices surged, making matters even worse.