interesting passage21 Mar 2016 07:30
The world is copying Japan’s “slow-puncture economy,” warned HSBC's senior economic adviser this week.
Stephen King — no, not that Stephen King — said global economic activity is “slowly deflating,” as the world battles fierce economic head winds, reports CNBC. Just not enough growth. Not enough inflation.
“These shortfalls are reminiscent of Japan's difficulties in the 1990s and beyond,” King warned, referring to the nation’s persistent stagnation since the early 1990s.
“Relative to projections five years earlier, Japan was nursing a 24% nominal GDP shortfall by the turn of the century,” he added. “And many of Japan's problems are now being replicated elsewhere: low bond yields, falling bank share prices and deleveraging."
We recall an annoying little ditty from the early ’80s called “Turning Japanese.” We don’t believe this is what its creators had in mind.
Meanwhile, the Financial Times told us yesterday that the yield on 10-year Japanese government bonds dropped to a record low and equities sold off as investors showed “deepening frustration with the negative interest rate policy and the faltering Abenomics growth program.”
Apparently, the puncture is expanding…
CNBC notes that the IMF warns that “Collective action is needed to boost the global economy.” It adds that a “combination of monetary and fiscal policy and structural reforms was needed to strengthen growth and guard against risks, ranging from unfulfilled infrastructure requirements in the U.S. to deflation in Japan.”
Morgan Stanley is also concerned about escalating global risk. Just this month, the firm raised its estimate of a global recession within the next year from 20% to 30%. Analysts at Citigroup have also warned of the possibility of a "significant and synchronized" global recession. They went so far as to say the world seems trapped in a “death spiral.”
Ah, but that was all before Janet Yellen abandoned a rate hike this week. That’ll fix the world’s ills. Even Japan’s…
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