June 7 (Bloomberg) -- China told lenders to set aside more money for a fifth time this year to cool inflation that is close to an 11-year high in the world's fastest-growing major economy.

Banks must put aside a record 17 percent of deposits as reserves starting June 15, which rises to 17.5 percent from June 25, the People's Bank of China said today on its Web site. The current requirement is 16.5 percent.

China's banking system is being flooded with cash from a trade surplus, foreign investment and speculative money betting on a rising yuan. The government is trying to slow inflation from April's 8.5 percent pace without triggering a slump in the economy that contributes the most to global growth.

``Liquidity is still a prominent problem in China,'' said Henry Li, an economist at Core Pacific Yamaichi International Ltd. in Hong Kong. ``The central bank will keep using the reserve requirement to curb inflation as it has a milder impact on economic growth compared to interest rates.''

Today's move will drain about 422 billion yuan ($60 billion) from the financial system. Local-currency deposits stood at 42.2 trillion yuan at the end of April.

Banks in areas severely affected by the May 12 earthquake are excluded from the changes, the central bank said.
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Bank of England (BoE) remains fixated on inflation risks and opted to leave the official Bank Rate unchanged at 5%, as expected.

According to the BoE's May Inflation Report, the central bank sees the risks in the current macro environment as very asymmetric, with inflation posing a significant threat and weak but manageable downside for growth. We disagree with the central bank's assessment and hold a much more bearish outlook for growth. Indeed, the latest macro data suggests that the economy is deteriorating rapidly. Real estate prices are already plunging faster than our models had warned, with Nationwide house prices down 4.4% YoY and commercial real estate price inflation contracting at a double digit pace. Consumer confidence continues to drop to new cyclical lows and the PMI services index has slipped below its boom/bust line. While retail sales volume growth has held up reasonably well, this is largely due to aggressive price discounting and our models warn that dramatic headwinds are building. In turn, it is likely that consumer price pressures will ease in the coming months. Bottom line: Stay overweight gilts within a global hedged fixed income portfolio. The BoE is making a policy mistake by remaining hawkish and will be forced to play catch up later this year.

http://www.bcaresearch.com/public/index.asp

But who?

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June 10 (Bloomberg) -- China's inflation rate slowed more than economists estimated to 7.7 percent in May from close to a 12-year high in April, according to two government officials.

Consumer prices rose less than the 8 percent median estimate in a Bloomberg News survey of 19 economists. The officials, who said they saw statistics bureau data, wouldn't be identified ahead of the official release on June 12.

Inflation slowed after food-price gains eased, the government ordered banks to set aside more money to cool lending growth and the yuan gained 5.2 cent percent versus the dollar this year. Soaring commodity prices may keep inflation above the central bank's 4.8 percent target for 2008.
http://www.bloomberg.com/apps/news?pid=20601080&sid=ackxCTWPdYz4&refer=asia

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WASHINGTON (AP) -- The inflation rate shot up in May at the fastest pace in six months, pushed higher by soaring costs for gasoline and other types of energy. The Labor Department reported Friday that consumer prices rose by 0.6 percent last month, the biggest one-month increase since last November, as gasoline costs surged by 5.7 percent. Food prices, which have also been rising sharply, were up 0.3 percent as the cost of beef and bakery products showed big gains.

Core inflation, however, which excludes energy and food, edged up a more moderate 0.2 percent in May. That increase was right in line with expectations and should help relieve worries that the big increases in food and energy could be breaking through to more widespread inflation.
http://biz.yahoo.com/ap/080613/economy.html

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June 16 (Bloomberg) -- Glassware and porcelain sales shot up more than 30 percent last month at the downtown Tokyo housewares store Kenji Wako manages. ``People wanted to get a bargain before prices went up,'' he says.

Japan, a nation that has seen mostly falling prices for years, is experiencing something it isn't used to: a ``buy now'' psychology that seems to be taking hold among consumers as record oil and food costs fuel inflation expectations.

A scourge that is threatening growth from Europe to China, inflation might be exactly what Japan needs. The prospect of higher prices may lift the economy by drawing out some of the 1,500 trillion yen ($14 trillion) Japanese households have squirreled away. Half sits in savings accounts paying almost no interest. Some is even stuffed under mattresses.

``Mr. and Mrs. Watanabe are slowly opening their purses. Why? One word: inflation,'' says Jesper Koll, director of Tantallon Research Japan, a Singapore-based hedge fund. ``The futon money is coming out.''

A 12 percent increase in the cost of gasoline this year has raised consumer expectations for inflation overall, after prices were flat except for fresh foods in 2007. A Bank of Japan survey found that households anticipate prices will go up by more than 7 percent in the next 12 months. That outlook helps explain why their spending climbed last quarter twice as fast as in the previous three months.
http://www.bloomberg.com/apps/news?pid=20601087&refer=worldwide&sid=anLGqekBZtLs

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June 20 (Bloomberg) -- Hong Kong's inflation accelerated in May as food prices climbed and the city's currency fell against the yuan, pushing up import costs.

Consumer prices increased 5.7 percent from a year earlier, the government said today on its Web site. That matched the median estimate of 14 economists surveyed by Bloomberg News. April's gain was 5.4 percent.

Hong Kong gets most of its food from China, where prices climbed 19.9 percent in May from a year earlier. Rising consumer demand and the weakness of the city's dollar, pegged to the U.S. currency and down almost 6 percent versus the yuan this year, have boosted inflationary pressures.

``Hong Kong is importing inflation from China because of a rising yuan and more expensive food there,'' said Joe Lo, senior economist at Citigroup Inc. in Hong Kong.
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June 27 (Bloomberg) -- South Korea's inflation probably accelerated to more than 5 percent for the first time since 1998, adding pressure on the central bank to raise interest rates.

The consumer-price index jumped 5.4 percent in June from a year earlier, according to the median estimate of 18 economists surveyed by Bloomberg News. Exports climbed 20.2 percent, after a 26.9 percent jump in May, a separate survey showed.

Oil prices have doubled over the past year, pushing inflation above central banks' comfort zones and threatening to derail economies across the region. Bank of Korea Governor Lee Seong Tae said on June 12 inflation is a bigger risk to the economy than slowing growth.

``Policy makers are facing a serious dilemma as economic growth slows and inflation accelerates,'' said Oh Suk Tae, an economist at Citibank Korea Inc. ``The central bank seems to have no option but to raise interest rates if oil prices remain high.'' Oh expects two quarter-percentage-point increases within the next three months.

Taiwan, India, Indonesia and the Philippines have all lifted borrowing costs in the past month to fight rising prices.
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June 30 (Bloomberg) -- Australia's central bank will probably leave its benchmark interest rate at a 12-year high as it assesses whether the economy is slowing enough to cool the fastest inflation in almost two decades.

Governor Glenn Stevens will keep the overnight cash rate target at 7.25 percent tomorrow in Sydney, according to all 25 economists surveyed by Bloomberg News. Six say the bank will raise the rate by the end of the year, and one forecasts a cut.

Slumping stock markets, record gasoline prices and rising borrowing costs have slashed consumer confidence and forced companies to trim spending and fire workers. Policy makers said a month ago it ``was important for the slowing trend to continue'' in Australia's $1 trillion economy, which grew in the first quarter at the weakest pace in almost two years.

``The bank should be starting to feel a bit more confident that the demand slowdown they're looking for is on track,'' said Shane Oliver, chief economist at AMP Capital Investors in Sydney. ``That will head off the need for another rate hike, regardless of the short-term threat to inflation coming from gasoline.''

The central bank has left borrowing costs unchanged since March, when it raised the benchmark rate by a quarter point for the fourth time in seven months.

The bank's board will announce its July decision at 2:30 p.m. in Sydney tomorrow.

Australia's current interest rates ``are essential'' to restrain inflation, which poses a greater threat to the economy than the global credit crunch, Stevens said on June 13.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aQPoBITplvhs&refer=worldwide

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July 9 (Bloomberg) -- The Bank of Korea will probably hold interest rates at a seven-year high this week after signs the economy cooled and inflation accelerated.

Governor Lee Seong Tae and his six colleagues will leave the seven-day repurchase rate at 5 percent tomorrow, according to all but two of 21 economists surveyed by Bloomberg News. They last adjusted the rate with a quarter-point increase in August.

Record fuel prices, coupled with a weaker won, are fueling the fastest inflation in almost 10 years, putting pressure on the central bank to raise borrowing costs. Still, policy makers are concerned Asia's fourth-largest economy will cool further as domestic demand falters and export growth slows.
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NEW YORK (AP) -- If the law of averages really worked, then the upcoming hike in the minimum wage would help offset consumers' surging food and fuel costs.

A good balance, right? Don't count on it.

Just ask Phyllis Tampling why. She's an owner of Jim's Restaurant in Prattville, Ala., a 50-year-old family owned dining spot that hasn't raised the prices on its menu recently even though what it pays for supplies soars by the day.

http://biz.yahoo.com/ap/080712/all_business.html

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WASHINGTON (AP) -- The economy showed the depth of its twin problems on Tuesday, slow growth and rising inflation, as the nation wrestled with a teetering financial system, a slumping dollar and rising prices for food and fuel.

The Labor Department reported that soaring costs for gasoline and food pushed inflation at the wholesale level up by a bigger-than-expected 1.8 percent in June, leaving inflation rising over the past year at the fastest pace in more than a quarter-century.

Over the past 12 months, wholesale prices are up 9.2 percent, the largest year-over-year surge since June 1981, another period when soaring energy costs were giving the country inflation pains.

Core inflation, which excludes energy and food, was better behaved in June, rising by just 0.2 percent, slightly lower than expectations.
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WASHINGTON (AP) -- Consumer prices shot up in June at the second fastest pace in 26 years with two-thirds of the surge blamed on soaring energy prices.

The Labor Department reported that consumer prices jumped 1.1 percent last month, much worse than had been expected. Energy prices rocketed upward by 6.6 percent, reflecting big gains for gasoline, home heating oil and natural gas.

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July 24 (Bloomberg) -- India's inflation rate unexpectedly fell for the first time in two months as the highest interest rates in more than six years slowed consumer demand for cars and houses, checking price increases in steel and cement.

Wholesale prices rose 11.89 percent in the week to July 12, after gaining 11.91 percent in the previous week, the commerce ministry said in New Delhi today. Economists had expected a 12.03 percent increase.
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July 23 – Financial Times (Barney Jopson in Khartoum and Murithi Mutiga and,Javier Blas): “Hunger on a massive scale is looming across the Horn of Africa as a combination of drought and high food prices have left more than 14m people in five countries in need of emergency food aid, according to the United Nations. Ethiopia is the epicentre of the crisis, with 10.3m people, or 12% of its population, in need of emergency aid in the next few months, the World Food Programme said. But the risk of starvation has spread in an arc that runs from Somalia and Djibouti through to Kenya and Uganda. The primary cause of the crisis is a prolonged drought across large parts of the Horn which has been exacerbated by the soaring costs of food and fuel. The impact is compounded because some countries, such as Ethiopia, have nearly exhausted their food reserves as rising prices forced the governments to subsidise food this year.”

July 25 – Financial Times: “East Asia is suffering from a bad case of inflation. That was the diagnosis this week from the Asian Development Bank’s Review… The treatment is clear, Asia’s governments must make curing inflation the priority. Interest rates across Asia must start to rise. East Asia has aggressively pursued growth for the last decade. When faced with large rises in the price of fuel and foods, governments did not curb demand. Although some Asian central banks have started tightening their monetary policy, it has been too little, too late. Inflation is now at record highs in South Korea and Malaysia. It has broken 25% in Vietnam. Wages are already rising to chase prices.”

July 21 – Bloomberg (Jason Folkmanis): “The Vietnamese government’s decision to increase retail gasoline prices will probably push consumer inflation past 30%, HSBC… said. Vietnam’s year-on-year inflation rate reached 26.8% in June, the highest since at least 1992. The government today announced the price of the most commonly used grade of gasoline in the country has increased by 31%, while the price of kerosene is now 44% higher.”

July 24 – Wall Street Journal (Elffie Chew and John Jannarone): “Malaysia and Singapore posted 26-year highs in inflation as food and fuel costs continue to back the region's central banks into a corner. Malaysian inflation rose a higher-than-expected 7.7% year to year in June… ‘June CPI data were pretty ugly, and the man in the street is feeling the pain, and if the Malaysian central bank wants an excuse to raise rates, this is it,’ said David Cohen, an economist at Action Economics…”

July 22 – Wall Street Journal Asia (Peter Wonacott): “Economic turmoil is roiling Pakistan, spawning another daunting test for the country’s wobbly leadership. A key ally of the U.S. in its global fight against al Qaeda and the Taliban, Pakistan already is trying to contain an insurgency by Muslim militants that is spreading from border areas with neighboring Afghanistan. The government also is struggling to hold together a shaky coalition of warring political parties. Now, an onslaught of economic woes threatens to overshadow both these challenges. Runaway food prices, energy shortages and a plunging stock market have hit ordinary Pakistanis hard and left the government scrambling to defuse public anger, say officials and analysts. ‘The economic issue is rapidly surpassing all other issues,’ says Shahnaz Wazir Ali, a special assistant to Prime Minister Yousuf Raza Gilani…”

July 22 – Bloomberg (Fiona MacDonald): “Kuwaiti lawmaker Mohammed al-Obaid urged the government to take serious measures to curb ‘alarming’ price rises in food and other commodities, the Arab Times reported. ‘The price hike crisis is actually bigger than the security issues or a possible war in the region,’ al-Obaid said…”

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July 31 (Bloomberg) -- Inflation in Europe accelerated to the fastest pace in more than 16 years in July, restricting the European Central Bank's room to bolster the economy even as unemployment starts to increase.

The inflation rate for the 15-nation euro region rose to 4.1 percent from 4 percent in June, the European Union statistics office in Luxembourg said today. The rate, the highest since April 1992, matched the median estimate of 36 economists in a Bloomberg News survey. A separate report showed unemployment was 7.3 percent in June, exceeding the 7.2 percent median forecast.

The ECB, which aims to keep inflation just below 2 percent, raised its key interest rate by a quarter point to 4.25 percent on July 3, a seven-year high. The risk is that higher borrowing costs will exacerbate the economic slowdown. Europe's manufacturing and service industries are contracting and confidence in the economic outlook this month plunged the most since the Sept. 11 terrorist attacks in 2001.
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Aug. 11 (Bloomberg) -- Schroder Investment Management's David Scammell is so convinced inflation has crested that the bond fund manager this quarter has sold securities designed to protect from rising consumer prices.

The money manager, who in the first half of the year bought all the so-called index-linked bonds he could find as crude oil rose above $100 a barrel, says the global economy has become too weak to sustain a rally in commodities, capping inflation.
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The Reserve Bank of India on July 29 raised the repurchase rate to 9 percent from 8.5 percent, after two increases in June. Governor Yaga Venugopal Reddy is grappling with inflation running at 12.01 percent, the fastest pace in 13 years.

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Aug. 12 (Bloomberg) -- China's inflation cooled to the slowest pace in 10 months, giving the government more room to restrain the yuan's advance and bolster economic growth.

Consumer prices rose 6.3 percent in July from a year earlier as food costs eased, the statistics bureau said today, after a 7.1 percent gain in June. That was below the 6.5 percent median estimate of 17 economists surveyed by Bloomberg News.
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WASHINGTON (AP) -- Consumer prices shot up in July at twice the expected rate, pushed higher by surging energy and food costs. The latest surge left inflation running at the fastest pace in 17 years.

The Labor Department reported Thursday that consumer prices rose by 0.8 percent last month, twice the 0.4 percent gain that economists had been expecting.

Core inflation, which excludes volatile food and energy costs, rose 0.3 percent in July, slightly higher than the 0.2 percent increase that economists had expected. For the past 12 months, core inflation has risen by 2.5 percent, the highest 12-month change since February.

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From Business Week:

Growing evidence suggests American consumers, businesspeople, and political leaders should all be bracing for double-digit inflation, probably as early as 2009.

The relative price stability of the past 15 years is giving way to worsening inflation, despite the recent softening of oil prices. The Consumer Price Index for all items shows the inflation rate averaged 2.6% a year from 1992 through 2007 but has doubled since January, reaching an annual rate of 5.6% in July (BusinessWeek.com, 8/14/08). By next year, the monthly figure could hit double digits, and the inflation rate for 2009 overall could triple 2007's 2.85%.

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WASHINGTON (AP) -- Wholesale inflation surged in July, leaving prices for the past year rising at the fastest pace in 27 years, according to government data released Tuesday.

The Labor Department reported that wholesale prices shot up 1.2 percent in July, pushed higher by rising costs for energy, motor vehicles and other products. The increase was more than twice the 0.5 percent gain that economists expected.

Core prices, which exclude food and energy, rose 0.7 percent. That increase was the biggest since November 2006 and more than triple the 0.2 percent rise in core prices that had been expected.
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TOKYO (AP) -- Japan's wholesale inflation remained near a 27-year high in August, the government said Wednesday, as the soaring costs of energy and raw materials continued to pressure businesses.
The index for domestic corporate goods prices rose 7.2 percent from a year ago, the Bank of Japan said.

The result was largely in line with market forecasts and fell just below a revised 7.3 percent increase in July, which marked the steepest climb since an 8.1 percent gain in January 1981. Then, as now, high oil prices drove inflation.

Despite higher costs, companies have yet to fully pass those increases on to customers. The data suggest that consumer inflation may be headed up over the next few months, threatening to further sap demand in an already slowing economy.

The core consumer price index, excluding fresh food prices, increased 2.4 percent in July.

http://biz.yahoo.com/ap/080910/japan_economy.html

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WASHINGTON (AP) -- Wholesale prices plunged a record amount in October as energy prices fell by the largest amount in 22 years.
The Labor Department reported Tuesday that wholesale prices dropped by 2.8 percent in October, the biggest one-month decline on records that go back more than 60 years. The previous record holder was a 1.6 percent fall in October 2001, the month after the terrorist attacks.

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WASHINGTON (AP) -- Consumer prices plunged by the largest amount in the past 61 years in October as gasoline pump prices dropped by a record amount.

The Labor Department said Wednesday that consumer prices fell by 1 percent last month, the biggest one-month decline on records that go back to February 1947. The drop was twice as large as the 0.5 percent decline analysts expected.
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Nov. 28 (Bloomberg) -- Europe’s inflation rate fell by the most in almost two decades and unemployment increased, adding to pressure on the European Central Bank to continue cutting interest rates to battle the recession.

Inflation in the euro area slowed to 2.1 percent in November from 3.2 percent in October, the European Union’s statistics office in Luxembourg said today. The drop is the biggest since at least 1991 and puts the inflation rate at the lowest in more than a year.

The Frankfurt-based ECB has already cut its benchmark rate by 100 basis points in two moves since early October, part of a wave of reductions by central banks around the globe as they combat the worst financial crisis since the Great Depression. The drop this month brings euro-area inflation close to the ECB limit of just under 2 percent, which it has exceeded every month since September 2007.

It “gives the ECB more room to maneuver,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt, who expects a 75 basis-point reduction next week to 2.5 percent. “And the rate cut process will continue.”

Economists had forecast that inflation would ease to 2.4 percent in November, based on the median of 34 estimates in a Bloomberg News survey. The statistics office will publish a breakdown of the inflation numbers next month.
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WASHINGTON (AP) -- Consumer prices in November plunged by the largest amount on records going back 61 years as energy costs posted nearly double the decline of the previous month. The Labor Department reported Tuesday that consumer prices fell 1.7 percent in November, surpassing the previous record decline of 1 percent set in October. The drop was the largest one-month decline dating to February 1947.
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WASHINGTON (AP) -- Consumer prices tumbled yet again in December, and inflation last year logged its smallest advance since the early 1950s, fanning new fears that the country may face a dangerous bout of deflation.

Worries about out-of-control price increases -- which had gripped the Federal Reserve and the country just seven months ago are now a distant memory. Some wonder in hindsight: Should the Fed have kept cutting interest rates all last year to help the recession-shocked country, rather than stopping in the summer and early fall out of concerns that lower rates would spur inflation?

The Labor Department's latest inflation report, released Friday, showed consumer prices dropped 0.7 percent in December, marking the third straight month prices fell.

For all of 2008, prices inched up 0.1 percent, the smallest increase since 1954. Although prices spiked during some summer months -- as oil hit record highs and food prices marched upward-- the inflation threat of 2008 ended up fizzling.

And that's a dose of welcome news to the strained pocketbooks of American consumers, who have cut back sharply on their spending under the negative forces of vanishing jobs, tanking home values, dwindling investment portfolios and a recession, now in its second year.
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Jan. 22 (Bloomberg) -- India’s inflation held near an 11- month low, giving room to central bank to cut interest rates for the fifth time since October at its next week meeting.

Wholesale prices climbed 5.60 percent in the week to Jan. 10 from a year earlier after gaining 5.24 percent the previous week, the commerce ministry said in New Delhi today. Economists expected an increase of 5.05 percent.

Policy makers around the globe are slashing borrowing costs and boosting spending as the world economy grapples with its worst crisis since the Great Depression. The Reserve Bank of India will lower its benchmark repurchase rate to 5 percent from 5.5 percent in its Jan. 27 statement, according to eight of 16 economists surveyed by Bloomberg News.

“The trajectory of inflation is clearly downwards and hence we still expect the Reserve Bank to cut rates next week,” said Sonal Varma, an economist at Nomura International Plc in Mumbai. “The unexpected rise in inflation is a one-off reading due to the truckers’ strike.”

India’s inflation rate increased for the first time in nine weeks in week to Jan. 10, mainly due to a rise in food prices, today’s report showed.

More than 4 million Indian truckers, who haul a majority of the nation’s goods, went on a nation-wide strike from Jan. 5 to Jan. 12, causing shortages and hampered the transportation of food and manufactured products in many parts of the country.
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WASHINGTON (AP) -- Inflation at the wholesale level surged unexpectedly in January, reflecting sharply higher prices for gasoline and other energy products.

The Labor Department said Thursday that wholesale prices increased by 0.8 percent last month, the biggest gain since last July and well above the 0.2 percent increase that economists had expected.

The acceleration was led by a 3.7 percent surge in energy prices with gasoline prices jumping by 15 percent, the biggest gain in 14 months.

Even outside the volatile food and energy sectors, wholesale prices showed a bigger-than-expected increase, rising by 0.4 percent. Economists had expected a slight 0.1 percent rise in so-called core inflation.

http://finance.yahoo.com/news/Wholesale-inflation-takes-apf-14410311.html

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WASHINGTON (Reuters) - U.S. consumer prices were unchanged in April from March and industrial output declined at a slower pace, reports showed on Friday, providing more evidence that the worst phase of the recession may be over.

The Labor Department said its closely watched Consumer Price Index was flat, as expected, after falling 0.1 percent in March. Compared to the same period last year, consumer prices fell 0.7 percent, the biggest 12-month decline since June 1955. In March, the year-over-year CPI rate fell 0.4 percent.
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May 23 (Bloomberg) -- David Swensen, the top-ranked college endowment manager in the past decade, said individual investors should own inflation-protected Treasuries because U.S. economic recovery efforts may lead to an increase in consumer prices.

“We’ve had this massive fiscal stimulus, massive monetary stimulus, and it’s hard to see how that doesn’t translate into pretty substantial inflation, or at least pretty substantial risk of inflation,” Swensen, Yale University’s investment chief, said in an interview on the “Consuelo Mack WealthTrack” television show that aired yesterday. Treasury Inflation- Protected Securities “should be in every investor’s portfolio," he said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aAOqcHEHmdAA

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May 29 (Bloomberg) -- Japan’s consumer prices fell for a second month in April, adding to signs that the recession will herald a return to deflation.

Consumer prices excluding fresh food declined 0.1 percent from a year earlier, the same pace as March, the statistics bureau said today in Tokyo. The result matched the median estimate of 29 economists surveyed by Bloomberg News.

Bank of Japan Governor Masaaki Shirakawa said this week that price declines will accelerate through the middle of the year ending March 2010 as demand slackens and crude oil continues to trade lower than last year’s record. Retailers including Nitori Co. and Daiei Inc. are cutting prices to entice cash-strapped consumers to spend more.

“The Japanese economy is entrenched in deflation, if we define it as continuous price declines,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Given the economy’s weakness, it’s hard to anticipate consumer prices will reverse course and allow the central bank to exit from its very accommodative monetary policy.”
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The Labor Department said Tuesday that the Producer Price Index increased by a seasonally adjusted 0.2 percent from April. That's below analysts' expectations of a 0.6 percent rise.

Despite the increase, wholesale prices fell 5 percent in the past 12 months. That's the largest annual drop in almost 60 years.

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The Labor Department reported Wednesday that the consumer price index rose a seasonally adjusted 0.1 percent last month, below analysts' expectations of a 0.3 percent rise.

Excluding volatile food and energy costs, core prices also increased 0.1 percent, matching expectations.
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TOKYO (AP) -- Deflation is clawing its way back in Japan, and that's not good news for an economy trying to recover from its worst recession since World War II.

Japan's key consumer price index tumbled at a record pace in May, the government said Friday. The core nationwide CPI, which excludes volatile fresh food prices, fell 1.1 percent from the previous year in the third straight month of decline.

The result marked the biggest fall since the government began releasing comparable data in 1971.
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WASHINGTON (AP) -- Consumer prices shot up in June by the largest amount in 11 months, reflecting the biggest jump in gasoline prices in nearly five years.

The Commerce Department said Wednesday that inflation at the consumer level rose by 0.7 percent last month, slightly higher than the 0.6 percent increase that economists were expecting. It was the biggest one-month gain since a 0.7 percent increase last July.

The big jump was seen as a temporary blip, however. Inflation is not expected to be a problem any time soon given a severe recession which is keeping a lid on wage pressures
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July 24 (Bloomberg) -- Now that the U.S. economy shows tentative signs of recovery, James Bullard, president of the Federal Reserve Bank of St. Louis, wants the Fed to adopt a plan for taming the inflation he expects may follow the end of the recession. Unless the central bank puts a strategy in place and presents it to the public, inflation expectations may run rampant, Bullard says.
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Aug. 6 (Bloomberg) -- The Bank of Japan will probably forecast that declines in consumer prices will extend into 2011 even as the economy recovers, according to two people familiar with the matter.

The estimate would be included in policy makers’ first economic projections for the financial year ending March 2012, scheduled for release in October, said the people, who declined to be identified ahead of the report. Central bankers have already predicted prices will fall 1.3 percent in the current year and 1 percent in fiscal 2010.
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.9 % last month. Economists were looking for a drop of .3%.

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Oct. 2 (Bloomberg) -- The U.S. faces the possibility of deflation for the first time since the Eisenhower administration, a threat that may prompt the Federal Reserve to keep interest rates near zero through next year.

Executives at Kroger Co., the largest U.S. supermarket chain, blamed deflation for a 7 percent drop in earnings in the second quarter, while falling prices for food, gasoline, and electronics left August sales unchanged at Costco Wholesale Corp. A sustained price drop might set off a chain reaction in which lower profits force employers to pare wages and payrolls. That would erode consumer demand, exacerbating wage cuts and firings.
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Nov. 17 (Bloomberg) -- The acceleration of Japan’s economy to the fastest growth pace in more than two years masked a slide in prices of goods and services that threatens to temper the nation’s recovery.

The domestic demand deflator, a measure of price levels that excludes the cost of imports, fell 2.6 percent in the third quarter from a year earlier, the most since 1958, Cabinet Office figures showed yesterday in Tokyo. At the same time, gross domestic product jumped 4.8 percent, the most since early 2007.

Sustained price declines threaten to curtail a corporate- profit rebound that’s already been insufficient to spur a rally in Japan’s shares this quarter. The report prompted Deputy Prime Minister Naoto Kan to say the government may outline an emergency-spending package as soon as today, adding that “I’m concerned we’re entering into a deflationary situation.”

“This isn’t sustainable growth and the government knows it -- that’s precisely why they’re talking about the GDP deflator,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “On the face of it, 4.8 percent growth is a positive for the Democrats, but they’re not reading it as a reason to abandon their economic policies.”
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