Tokyo slipped into second place after 14 years at the top, according to the survey by the Economist Intelligence Unit. Japanese city Osaka was joint fourth with Paris.

The rest of the top 10 positions comprise western European cities, while New York is the most expensive US city and joint 27th in the world with Dusseldorf in Germany.

Elsewhere, an improving economic outlook has pushed Brazilian cities up the ranking, while Asian cities number many of the cheapest destinations, the survey showed.

European hubs dominated the list, which compared a basket of goods and services, denominated in US dollars, from more than 130 world cities.

"The position of Oslo at the top of the ranking highlights a much wider increase in the relative cost of living across Europe, driven by the long-term underperformance of the dollar," the study said.

Oslo's displacement of Tokyo came as "little surprise", it added.

"Six months ago Oslo overtook (Japan's) Osaka as the second most expensive city in the ranking, making it a question of when, rather than if, Tokyo would follow suit.

Japan's economy stagnating
"Norway has seen strong economic growth following a recovery in 2004, enjoying high consumer confidence, rampant investment and still-low interest rates," the study found.

Japan's economy, meanwhile, has been hit by a gradually weakening yen, compounded by years of low inflation and deflation, it added.

The Brazilian cities of Rio de Janeiro and Sao Paulo experienced the sharpest jump in ranking, on the back of economic recovery across the region.

Asia offers value-for-money
Although Japanese cities remain among the most expensive in the world, many cities in Asia offered better value for money, the survey said.

Five of the seven lowest-priced cities surveyed are based in Asia, including Manila, while the cheapest city is Tehran.

The EIU survey, which excluded rental prices, used different methods of comparison than a similar study in October by the Financial Times. The FT had found that London was the most expensive city in Europe and was far ahead of Paris, largely owing to soaring costs of rented accommodation.

2006 ranking City/Country (Last year)

1. (3) Oslo/Norway
2. (1) Tokyo/Japan
3. (8) Reykjavik/Iceland
4. (2) Osaka/Japan
5. (4) Paris/France
6. (5) Copenhagen/Denmark
7. (7) London/Britain
8. (6) Zurich/Switzerland
9. (8) Geneva/Switzerland
10. (10) Helsinki/Finland

AFP