- European Central Bank
Shinzo Abe and Haruhiko Kuroda are doing whatever it takes to end decade of deflation in the world's third largest economy, but perhaps, the Eurozone will become another Japan?
Back in 1998 BoJ's Governor Yasuo Matsushita signed a report, saying there was no risk of deflation, and within six months Japan's core CPI began falling in a trend that was lasting for the next 15 years. Now, in 2014 analysts are expressing their concerns that Mario Draghi risks making the same mistake– publicly calming down investors, diminishing a threat of deflation and not introducing the U.S.-style quantitative easing. Experts are now trying to compare the state of the Eurozone economy and Japan's economy back in 1998. The 18-nation bloc is facing a weak economic expansion following a series of shocks, domestic banks are reluctant to lend money, the shared currency is on the rise, while ECB's monetary policy stance is debatable. All these points were observed in Japan under Matsushita leadership.
While the International Monetary Fund sees a 15-20% risk that long period of inflation below the official level will de-anchor the expected anticipation by the Eurozone's consumers about the longer-term inflation, economists at Morgan Stanley are giving a 35% chance of the similar disaster.
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