http://www.bloomberg.com/news/2014-10-08/europe-will-dodge-japan-s-lost-decade-ex-boj-official-predicts.html
A weakening currency will save the euro region from repeating Japan’s so-called lost decade, according to a former Bank of Japan official who grappled with the crippling economic stagnation and price declines.
“People are saying the euro-zone economy is in bad shape, that it’s suffering a Japanization, but that’s going too far,” said Yasuaki Amatatsu, who joined Bank of Tokyo-Mitsubishi UFJ Ltd. as an analyst in March after more than 10 years at the BOJ. “The economy has already bottomed out.”
The euro has slumped as much as 11 percent since touching a 2 1/2-year high of $1.3993 on May 8, as the European Central Bank cut one of its key interest rates rates to negative. President Mario Draghi has signaled a desire to expand the bank’s balance sheet to as much as 3 trillion euros ($3.8 trillion), just as policy makers at the Federal Reserve remove quantitative easing and consider a rate increase.
Economists predict the euro-area economy will expand 0.8 percent this year, following two years of contraction, and growth will accelerate to 1.3 percent in 2015 and 1.7 percent in 2016, according to a Bloomberg News survey.
“The ECB has set its sights on an exchange rate below $1.30,” Amatatsu, who was a member of the team responsible for currency intervention at Japan’s central bank between 2004 and 2006, said in an interview at his Tokyo office on Oct. 2. “The Group of 20 has basically endorsed a strong dollar, so Draghi is doing his utmost to weaken the euro.”
A current account surplus reduces a country’s dependence on foreign capital, making it more attractive to investors. Annual surpluses in Japan since at least 1996 underpinned the yen’s haven status, supporting its climb to a record 73.35 per dollar in 2011. That reinforced the deflationary spiral that characterized the country after its asset-market bubble burst in the early nineties.
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