Japanese deflation continues, bond market rally may not

Japan remains in deflation. Bloomberg reports today:

Japan’s consumer prices fell for a 12th month in February, adding pressure on the central bank to eradicate deflation that is hampering the economic recovery.

Prices excluding fresh food slid 1.2 percent from a year earlier, after dropping a 1.3 percent in each of the preceding two months, the statistics bureau said today in Tokyo...

In Tokyo, core prices slid 1.8 percent in March on the year, the same pace as the previous month. The figures for the capital are released a month earlier than nationwide data, making them a harbinger of price trends. Tokyo prices fell a record 1.6 percent in the fiscal year ending March 31.

Japan's persistent deflation notwithstanding, Bloomberg reports that Bill Gross thinks that global bonds have seen their best days.

Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co., said the almost three-decade bond market rally may be drawing to a close.

Excess borrowing in nations including the U.S., U.K. and Japan will eventually lead to inflation as governments sell record amounts of debt to finance surging deficits, Gross said. Pimco, which announced in December that it would offer stock funds for the first time, is advising that investors buy the debt of countries such as Germany and Canada that have low deficits and higher-yielding corporate securities.