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Japanification: the economic spectre haunting Europe

The eurozone is showing the perturbing symptoms first diagnosed in Japan, but ever-looser monetary policy is not the answer

By Paul Wallace  

A view of Frankfurt including the European Central Bank. Clouds are gathering over the currency union. Photo: Boris Roessler/DPA/PA Images

Two decades ago as Europe was preparing to launch the euro, something rather odd was starting to happen on the other side of the world. In the late 1990s, Japan began to experience deflation, a condition thought to be banished in the buoyant post-war era of global expansion. Both short-and long-term interest rates fell to historic lows, even turning negative in some parts of the money market. At the…

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