OECD sees deflation woe in Japan but not elsewhere

PARIS (Reuters) - The OECD sees little prospect of Japan pulling out of deflation this year or even next year, but believes deflation is not a serious risk elsewhere, OECD chief economist Jorgen Elmeskov says.

"For Japan...we do not see any exit from deflation in the near term. That means definitely not for this year and maybe even it could be difficult to see it for next year," Elmeskov told Reuters in an interview on the body's latest GDP forecasts.

In other major economies, a collapse in commodity prices in the first half of this year had led to zero inflation or retreat in monthly readouts on price levels but the OECD saw little risk of sustained deflation, he said.

Deflation is a prolonged and widespread decline in prices that causes consumers and businesses to curb spending as they wait for costs to fall further.

"We currently have negative inflation at the level of headline rates in a number of countries," he said.

"But we don't think this has anything to do with deflation because underlying inflation rates are humming along nicely and only coming down a wee bit compared to where they were a year ago."

The OECD released improved forecasts for GDP in several key economies on Thursday but is not due to update its inflation projections before a broader revision of OECD-wide macroeconomic forecasts in November.

In a statement accompanying the GDP forecasts on Thursday, the OECD said inflation expectations remained well-anchored and that a recent rebound in commodity prices meant "the risk of sustained deflation appears to be small outside Japan."

(Editing by Patrick Graham)