from its previous peak in 1990, of above 5 %, gdp growth declined to a standstill in 1992 - 1993. between 1995 and 2007 japan ’ s per capita gdp grew at an average yearly rate of only 1. 2 %, against 1. 8 % in the euro area and 1. 9 % in the us. looking at the current situation, inflation reached a peak only a few months ago. in july, inflation in the u. s. hit 5. 6 %, the highest rate since 1991. in the same month, inflation in the euro area surged to 4 % and, in the uk, consumer price inflation hit 5. 2 % in september. this high inflation was mainly the result of the surge in commodity prices in the first half of the year. since then, global economic growth slowed down sharply and the commodity boom turned to bust. the price of the barrel of crude oil dropped sharply, from a peak of 147 usdollar / barrel in july to below 50 us dollars prt barrel in recent days. against this background, the latest releases have shown a significant decline in inflation rates, though in most countries still remaining above the respective medium term - objective for price stability. the data clearly do not show any country in deflation right now. looking ahead, the inflation outlook is bound to change substantially. if raw materials prices remain at current levels, the year - on - year change in the energy related component of the consumer price indices will turn sharply negative in many countries in 2009. as a result global inflation can be expected to drop quickly over the next months, but should remain in positive territory. for the euro area, the latest inflation forecasts for 2009 range as follows ( see table 1 ) : 1. 4 % for the oecd, 1. 6 % for the imf, 1. 8 % for consensus economics. for 2010 many forecasts foresee a pick up in inflation in the euro area, except for the oecd ( 1. 3 % ) ; consensus forecast projects 2. 0 %. to my knowledge, no individual private sector analyst or forecast is projecting deflation in the euro area either ; this is true, in particular, for the ecb ’ s survey of professional forecasters. the longer term expectations, as measured by the 5 - year break - even inflation rate 5 years ahead derived from inflation - linked bonds hover around 2 %. moreover, the available forecasts and expectations do not foresee any material risk of def

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. during the first oil crisis, crude oil prices surged from 3 u. s. dollars to 12 dollars per barrel – a fourfold rise – in a brief period between 1973 and 1974. during the second oil crisis, they surged from 15 dollars to 40 dollars between 1979 and 1980. unlike these two cases, the current surge has been continuing over an extended period, which makes a comparison of the rise in oil prices difficult, since the extent of the increase differs depending on where one starts the calculation. if we start from 2002, when the level of oil prices was 21 dollars, the current level of 110 - 120 dollars – somewhat below the recent peak – is more than five times the level recorded in 2002. this means that the rise during the current phase has been the largest, even compared with the two oil crises. as a result, the size of the income outflow resulting from the surge in oil prices has also been the largest during the current phase : about 5 percent of real gdp, compared with about 3 percent during the two oil crises. rises in crude oil prices, as well as the resultant outflows of income and decreases in production capacity, should be accepted as given conditions for japan's economy. in other words, they cannot be avoided. however, economic and price developments differed markedly between the periods immediately after the two oil crises emerged. during the first oil crisis, japan's economy suffered from a combination of runaway inflation and economic stagnation – in other words, stagflation. economic indicators show that the economy, which continued enjoying rapid annual growth of 8 - 9 percent until 1973, suddenly contracted by 1 percent in 1974 and cpi inflation peaked at an annual rate of 25 percent in 1974. 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. at that time