As leaders of the world's leading industrialized powers gather in the resort town of northern Japan for their three-day summit beginning Monday, the world will focus on what "prescriptions" they will write for financial turmoil and fuel and food price hikes, dubbed as the 3F crisis that is threatening the global economy.
The world economy had become hostage to the 3F crisis, said French Finance Minister Christine Lagarde while attending a meeting of finance ministers from the Group of Eight (G8) club in Osaka, Japan, in June.
The turbulence of the world's financial market triggered by the US subprime loan crisis has prompted huge flows of hot-money into commodities such as oil and food, sparking a surge in the prices and stoking inflation worldwide.
Inflationary pressures also weaken central banks' capability to stimulate economic growth and stabilize the financial market.
Under these circumstances, rising oil prices and stabilization of the financial market will figure prominently at the G8 summit in Toyako, according to the official website of the summit. Soaring food prices will be a separate issue high on the agenda of the leaders of the G8 club which includes Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.
Turbulent financial market
Since the emergence of the US subprime loan crisis last summer, financial institutions in Western countries have suffered billions of dollars in direct losses, resulting in a slump in major stocks worldwide.
The condition of the credit crunch in the financial market has improved somewhat in the past few months after the US Federal Reserve cut interest rates and injected billions of dollars into the market.
International Monetary Fund (IMF) chief Dominique Strauss-Kahn has struck an optimistic note, saying the worst of the credit crisis appeared over.
But many analysts have warned the slumping US housing prices had not been reversed fundamentally while the credit and money market conditions could deteriorate further.
Meanwhile, the devaluation of the US dollar and soaring oil prices would further increase global inflationary pressures, they said.
"The world economy continues to face uncertainty and downside risks persist," said a statement issued by the G8 finance ministers at the end of their meeting.
"Further declines in housing prices in the US and greater strains in the financial market may adversely affect the global outlook," says the statement.
At their meeting, the ministers made repeated calls for a stable financial market, but they provided few choices for concrete action, especially on the issue of the US dollar's exchange rate.
Europe and Japan have been complaining about the devaluation of the US dollar, but there is no sign yet that the US side will take any substantial action, although US Treasury Secretary Henry Paulson had said that a stronger dollar is in the interests of the United States.
Analysts say it is difficult for G8 members to adopt a coordinated currency policy as they face different economic cycles and inflationary pressures.