Europe is turning Japanese: outside of central bank action, the economics point towards a future Eurozone that looks very much like modern day Japan, says...

Pendal Group

Pendal Group

Europe is turning Japanese: outside of central bank action, the economics point towards a future Eurozone that looks very much like modern day Japan, says Vimal Gor. The similarities in the demographic profile of 1990's Japan and Europe are striking. If we chart some key indicators (GDP growth, money supply growth and inflation) they highlight the path that Europe is on, and it matches post-1990 Japan almost perfectly. All have plunged at a similar pace to a similar level. The BoJ took nearly 10 years to cut the official interest rate to zero and didn't even consider QE until a long time after that. In Europe we are left with promises of a poor version of proper QE because there are still disagreements between the member nations. Now is the time to see what Draghi has in his kitbag. We've seen from the US experience that market worries can be allayed by strong central bank action but Europe might be a harder nut to crack. Click here to see how Europe and Japan compare (VIEW LINK)


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