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Despite having one of the highest levels of public debt, Japan is seen as a “safe haven” for investors. More than 90% of Japanese government debt is held by domestic investors, and this “home bias” of Japanese investors seems to be supporting the somewhat unsustainable fiscal situation – at least, for now.
Why did the ECB not announce any action last week following the release of very low Eurozone inflation figures? Surprisingly, the ECB does not seem too concerned about the risk of disinflation or even deflation. To understand the ECB’s position, it is important to look at the factors which have been keeping inflation low.
The appreciation of the euro not only makes the Eurozone less competitive but it also causes problems for the rebalancing of the Eurozone – even though they have a single currency, it makes the periphery countries less competitive within the Eurozone compared to the core. This week, we look at why this is the case.
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