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Slowdown in services inflation highlights failure of QQE

Recent data suggest that the economic recovery may be a touch stronger than we had been expecting. However, there are no signs that the tight labour market is fuelling price pressures. While the Bank of Japan can blame the stronger yen for a sharp fall in goods inflation, the ongoing slowdown in services inflation and the drop in inflation expectations highlight that the benefits of its aggressive policy easing are increasingly elusive.

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