The yen has strengthened sharply since the start of the year and is now back at the level seen at the launch of Quantitative and Qualitative Easing. The resulting plunge in import prices has contributed to the moderation in underlying inflation. What’s more, corporate inflation expectations have continued to fall even as energy prices have rebounded. The upshot is that chances of reaching 2% inflation any time soon have diminished further, increasing the pressure on policymakers to introduce more stimulus.
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