The Japanese economy stagnated and has been in an extended period of little or no growth for over 20 years, far longer than a conventional recession, as well as deflation and low consumer demand.
Signs of recovery are only just emerging as the Abe policies know and ‘Abenomics” start to have an effect.
That’s scenario is not upon Europe however although could emerge under certain conditions, some of which look more plausible than others, Maxime Alimi, senior economist at AXA IM said.
Alimi said ‘Japanisation’ would require government debt to rise further without triggering another sovereign crisis.
There would also need to be a further fall in inflation and bond yields, the ECB would need to fail in its addressing of the impairments faced by many of Europe’s banks and it would also require that the ECB be either unable or unwilling to use quantative easing effectively.
For all this to happen seems unlikely but there are clearly danger signs.
