Experts have gathered at a conference in Tokyo, organised by the Centre for Investor Education, to discuss what lessons can be drawn from Japan’s economic decline.
The forum, ‘Avoiding Japan’s Lost Decades’, involved leading academic, political and financial experts and investigated how and whether the West can avoid the deflationary and anaemic growth that has plagued the former Asian Tiger ever since the early 1990s.
Speaking at the conference, Andrew Milligan of Standard Life Investments said the same economic conditions are being seen in Europe. “There is definitely a growing risk that the eurozone as a whole, and some countries such as Italy in particular, are beginning to see similar problems to Japan,” he said.
The reason for this he saw as the failure to deleverage prudently, along with Europe’s regulatory weaknesses.
“Demand-side stimulus, whether monetary or fiscal, must be complementary with other issues such as structural reforms and macro-prudential regulation,” he said.
Mr Milligan did, however, admit the “outcome is still uncertain”.
When asked by InvestorWeekly where the dangers are in Europe, Shane Oliver of AMP Capital also sees the risks as lying in the southern countries.
“As an aggregate, you would say the eurozone, but the ones that are probably most in danger are the southern countries,” he said.
Interestingly, Mr Oliver does not see Japan as representing the only trajectory Europe could take. “There are three paths,” he said. “A re-run of the Great Depression; another is the Japanese model, 20 years of sub-par growth and potentially falling prices; and the other one is a short, sharp slump and then a gradual recovery.”
More specifically, however, Mr Oliver highlighted high levels of unemployment in Spain and Greece, noting that these countries could yet see a great depression.
Nevertheless, both Mr Milligan and Mr Oliver would admit that Europe can learn from Japan.
“Commentators are increasingly looking at the Japanese economy,” Mr Milligan said or, as Mr Oliver put it more philosophically, “History does not repeat itself, but it does rhyme.”
