Deflation, Japan Leads the Way

FN: Deflation first. Then inflation. That is the Master Plan. After fighting deflation for more than a decade and using every single trick in the book, and some that weren't, the Bank of Japan has still been unable to spark inflation. It is becoming more and more probable that the BOJ has lost control and cannot maintain price stability. Expect deflation to accelerate as job losses continue to mount.

The Federal Reserve and Ben Bernanke face the same kinds of risks, but from a much weaker starting position than the BOJ.

UPDATE 2-Japan deflation deepens, BOJ may keep funding support: "
* Wholesale prices fall at a record 6.6 percent yr/yr
* Drops in commodity costs, weak demand weigh on prices
* Analysts say BOJ to prolong corporate finance support

TOKYO, July 10 (Reuters) - Japanese wholesale prices fell a
record 6.6 percent in the year to June, as the world's No.2
economy slides deeper into deflation, reinforcing the view that
the Bank of Japan will keep its corporate funding support
measures in place beyond September.