Where Is the Risk of Deflation the Greatest?

J.P. Morgan has some predictions about where the risk of deflation is the greatest in a recent note called Slack Attack (subscription required):

In terms of cross-country risks, deflation pressures will be largest for those economies projected to have the deepest downturns relative to their potential growth and those that already have particularly low levels of core inflation. For those countries with a measure of sequential (%3m/3m) core inflation and an output gap measure, the larger deflation risks are found in Sweden, Taiwan, Hungary, and the Czech Republic (chart, page 12). Japan, Thailand, and Singapore also have a relatively high risk of deflation. By contrast, with their relatively lower projected output gap and higher rates of core inflation, Indonesia, South Africa, Brazil, and Peru appear the least likely to fall into deflation. Indeed, with core inflation run rates of 5-9%, the risk is next to zero for most of this group. Many of the major DM countries lie in the middle of the cluster and so the relative risks are harder to gauge. This includes the US, Euro area, and the UK.