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Paul Donovan -- Japan's serious inflation problem

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People walk past a fashion boutique in a shopping district in Tokyo on June 29.   © Reuters

Which country has the highest inflation in the developed world? At a time of generally low inflation, this question may take some thinking about. Certainly the U.S. has high inflation (on most measures, prices in the U.S. are rising at or above the average of the past two decades). But the answer is not the US. The country with the highest inflation in the developed world is Japan.

Japan's consumer price inflation is growing at almost 4% a year on average. This is twice the target set by the Bank of Japan. Price increases this high would seem to suggest that the Bank of Japan has lost control of the inflation situation.

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