"The displacement of Tokyo comes as little surprise. A gradually weakening yen has been compounded by years of low inflation and deflation in the Japanese economy," the EIU said.

"Norway has seen strong economic growth following a recovery in 2004, enjoying high consumer confidence, rampant investment and still-low interest rates," it added.

Eastern Europe has seen price hikes too, especially in countries given entry to the EU or undertaking accession talks.

The cost of living jumped more than 5% in Istanbul (48th place), Prague (58th place), Warsaw (63rd place), Kiev (82nd place), Bucharest (95th place) and Belgrade (107th place) .

Cheapest spots

The cost of goods and services in the 130 cities was compared in US dollar terms, so the results partly reflect the currency's long-term underperformance, the report said.

The highest placed US city was New York, ranked at number 27.

In South America the biggest rises were in Brazil where Rio de Janeiro and Sao Paulo jumped 22 places to the joint 87th spot thanks to an economic revival in the region.

While Tokyo and Osaka are among the most expensive cities in the world, the cheapest region as a whole is Asia, home to five of the seven lowest-priced cities.