Is the euro zone at risk of Japan style deflation?

CNBC ^ | 11/10/2013 | Katie Holliday

[TexGrill]

As inflation in the euro zone languishes at its lowest level in four years, some analysts argue that the region is at risk of a Japan-style deflationary rut.

In October, the euro zone's inflation reading came in at 0.7 percent on year, down from September's 1.1 percent and a four-year low. Core consumer prices in Japan, which include oil but strip out volatile food prices, rose 0.7 percent in year to September with a broader measure rising 1.1 percent.

Japan, the world's third biggest economy, has been plagued by deflation for almost two decades and inflation has only recently started to edge higher following aggressive monetary stimulus from the Bank of Japan.

Worries over low inflation levels prompted the European Central Bank to cut its benchmark interest rate by 25 basis points on Thursday.

"Policymakers in Europe are pressured to act because they do not want Europe to become the next Japan," said Kathy Lien, managing director of foreign exchange strategy for BK Asset Management.

[TexGrill]

Global business tip

[wonkowasright]

The cause of Japanese deflation and the potential EU deflation is largely the same thing. Lack of people having kids resulting in shrinking populations. Fewer people smaller economy.

But for our latin american immigrants in the US we would already be in a deflationary cycle ourselves. We need more total humans to stave off this here. We can either make them ourselves or allow immigration to stave it off.