The UK 's Japanese nightmare

18 November 2009 By Ian Campbell

The central bank s Monetary Policy Committee was split earlier this month. The chief economist worries about bubbly asset prices. But for other members, postbubble deflation is the main fear. Japan s weak growth and spiralling debt shows the danger.

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UK consumer prices were 1.5% higher in October than a year earlier, a jump from a 1.1% rate in September, the national statistical office reported. The Bank of England says it expects consumer price inflation to rise above its 2% inflation target in coming months as petrol prices are raised and VAT returns to a 17.5% rate, from 15%, in January.

Japan's economy grew by 1.2% in the third quarter from the previous quarter, or by 4.8% on an annualized basis. But the domestic demand deflator, a measure of inflation, fell by 2.6% from a year earlier, Japan's statistical body reported. Nominal GDP fell by 0.1% from the previous quarter, or at an annualized 0.3%.

The Confederation of British Industry said that manufacturers expect marginal growth in output in coming months and prices to fall very slightly.

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