Oct. 19 (Bloomberg) -- Record oil prices risk stoking inflation and stunting economic growth in Asian economies, officials said.

``Rising oil prices will affect Japan's economy,'' Economic and Fiscal Policy Minister Hiroko Ota said today in Tokyo. High energy costs are contributing to inflationary pressure, the Bank of Korea said.

Rising prices may limit the ability of central banks to ease borrowing costs, just as economic growth cools in the U.S., the biggest market for most of Asia's export-dependent economies. The International Monetary Fund this week cut its forecast for U.S. economic growth this year, as a two-year housing recession contributes to the weakest expansion since 2002.

``If we see prices persist at these levels, obviously it will stimulate inflationary pressures in the region,'' Subir Gokarn, Asia-Pacific chief economist at Standard & Poor's said yesterday. ``It will also perhaps increase the risk of China and India slowing down.''

Crude oil for November delivery reached $90.02 a barrel on the New York Mercantile Exchange, the highest price since trading began in 1983. It was at $89.52 at 10:45 a.m. in Singapore.

India's central bank Governor Yaga Venugopal Reddy said in Washington yesterday that increasing inflationary pressure poses a risk to the South Asian economy.

India's Inflation

``The Reserve Bank of India continues to grapple with a high level of excess liquidity in the system, record high international oil prices, and rising local commodity prices, all of which could threaten its inflation target,'' Standard & Poor's wrote in a report this week.

China's consumer prices rose in August to the highest in more than a decade, prompting the central bank to raise the benchmark one-year lending rate to a nine-year high and to order banks to set aside more money as reserves.

The inflation rate slowed to 6.2 percent in September, from 6.5 percent the month before, the government said yesterday.

In Singapore, where inflation is running at the fastest pace in more than 12 years, the central bank this month said it would allow faster gains in the currency to counter import price increases.

Policy makers at the Bank of Thailand said higher oil prices may fan inflation and curtail economic expansion when they kept the benchmark interest rate unchanged on Oct. 10.

Indonesia's Budget

Indonesia, the only Southeast Asian member of the Organization of Petroleum Exporting Countries, has estimated local oil prices will average $60 a barrel this year and in 2008 for calculating its 761 trillion rupiah ($84 billion) budget for next year.

Prices are already 35 percent higher than the government's forecast as local crude closed at $81.10 a barrel yesterday. The local oil price has averaged $65.80 a barrel this year.

``Countries that operate on oil subsidy schemes such as India, Indonesia and Malaysia are going to be facing increasing pressure to pass on these higher costs,'' said Robert Prior- Wandesforde, a senior economist at HSBC Holdings Plc in Singapore.

In Japan, Ota said she was concerned that higher energy costs will hurt profit margins at small and mid-sized companies that are unable to pass them on to consumers. Japanese companies have had difficulty increasing prices even as raw material costs climb because of almost a decade of deflation.

Cash earned by the oil-producing nations in the Middle East contributes to asset bubbles, Zhou Xiaochuan, governor of the People's Bank of China, said yesterday.

China's Asset Bubbles

``The high oil price has resulted in a surge of cash at oil-producing countries, and as a result, this large amount of funds is flowing around the world looking for investment opportunities,'' Zhou said. ``China's excess liquidity is partly linked to a surge of cash in the world, which is partly contributed by oil-producing countries.''

The region's refiners are already suffering.

S-Oil Corp., South Korea's third-biggest oil refiner, said today third-quarter profit fell 54 percent. Idemitsu Kosan Co., Japan's second-biggest oil refiner, this week cut its full-year pretax profit forecast on narrower margins.

Rising currencies and expanding economies may buffer Asian nations against higher fuel costs.

``Asian countries have a lot of momentum,'' said Prior- Wandesforde. ``I wouldn't panic on the impact of oil above $90 a barrel on either growth or inflation. Part of the strength is a reflection of strong global growth, which bodes well for exports.''

The International Monetary Fund this week raised its forecast for growth in Asia's developing nations in 2007, led by China's accelerating economic expansion. The region's developing markets will expand 9.8 percent this year, faster than the 9.6 percent rate the IMF predicted in July.

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net.

Last Updated: October 18, 2007 23:45 EDT