CHICAGO--(BUSINESS WIRE)--In his latest research note for 2013, Adolfo Laurenti raises his forecast for Japan and lowers the growth outlook for Europe. Reason for the changes can be found in the very different choices made by central banks. Read the latest newsletter, Themes on the Global Markets or watch a video. Mesirow Financial’s Deputy Chief Economist calls the Bank of Japan’s recent action “the most daring monetary experiment of modern times: a massive quantitative easing plan… as a result, we now expect the Japanese economy to expand by 1.2% in 2013 and 2.9% in 2014.”
With that announcement, the BOJ also set an explicit inflation target of 2.0%. Adolfo Laurenti explains that deflation has been a major challenge for Japan, but that QE alone will not do the trick. Laurenti cautions that trying to inflate its way out of debt would be a big mistake for Japan, doubting that “such a policy could be pursued without being punished by global markets, resulting in a surge in fixed-income yields that even the BOJ would be hard-pressed to counter.” He calls a recent warning about currency devaluation from Washington “disingenuous,” because “the Bank of Japan is simply following a path recommended by Federal Reserve Chairman Ben Bernanke… what the BOJ is doing doesn’t differ in nature from the policy of quantitative easing pursued by the Fed.”
Though the European Central Bank has been heavily influenced by traditional, Bundesbank-style, hawkish monetary policy, Laurenti predicts that Europe may take a cue from Japan in its own way. “The ECB may concede some ground, both on (interest) rates and on the special facilities provided to prevent any meltdown in the banking sector and the sovereign debt market.” He explains that would not involve a change of philosophy from hawk to dove. “What is really changing in the Eurozone is the reality on the ground with a broad deterioration of economic indicators… we are bearish on the euro.”
For more on developments in the global markets, the April 2013 issue of Themes on the Global Markets, as well as archived issues, can be found at mesirowfinancial.com.
Mesirow Financial is a diversified financial services firm headquartered in Chicago. Founded in 1937, it is an independent, employee-owned firm with approximately 1,200 employees globally. With expertise in Investment Management, Global Markets, Insurance Services and Consulting, Mesirow Financial strives to meet the financial needs of institutions, public sector entities, corporations and individuals. For more information about Mesirow Financial, visit its website at mesirowfinancial.com.
