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Japan, with an inflation rate of -1.2%, is something of a special case, as it is just beginning to emerge from a prolonged recession.
With inflation rates now in the low single digits, attention has become more narrowly focused on the problem of determining quantitatively what the "optimal" inflation rate should be. Evidence to date suggests that policymakers?iews have coalesced, however tentatively, around a "2% solution" to this question. For example, consider these explicit inflation targets: 2.5% for the Bank of England, less than 2% for the ECB, 1-3% for the Riksbank in Sweden, 1-3% for the Bank of Canada, 0-3% for the Reserve Bank of New Zealand, and 2-3% for the Reserve Bank of Australia...
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