How realistic is a deflation scenario in the industrialized countries, the Japanification?
Japanification would imply stagnation and outright deflation. As long as
growth remains below trend, inflation is going to be low, but I don’t
see the risk of outright deflation with exception of some countries of
the Euro periphery: As long as Germany is not willing to reflate,
internal devaluation is forced upon the periphery. It would be better if
Germany allowed inflation to go beyond 2%.
Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics
