Japan core CPI sinks

Deflation may not be a problem in the US, but Japan could once again be seeing problems on the pricing front. The Japan's core Consumer Price Index, which removes fresh food, fell by 1.1% versus a year ago, compared to a 0.1% decline in April.

The world's second largest economy struggled with deflation in the early part of the decade following the economic stagnation that mushroomed after the bubbles burst in both the stock and real estate markets.

Many critics blame a slow response by the government and the Bank of Japan in the middle 1990s for the lost decade that followed. And falling prices this time around could undermine efforts by authorities to boost consumer spending.

The BoJ finally drove interest rates to zero and flooded the system with extra cash, but it was the economic recovery in the US and fast growth in China that finally pulled Japan out of a recession and enabled the central bank to end its policy of quantitative easing.

Fed Chief Ben Bernanke and other US policymakers are keenly aware of what happened to Japan and have been much quicker to react to the crisis in the US in hopes of avoiding a repeat at home.