Japan vs European debt reduction strategies
In an attempt to compare the European way and the Japanese way with hight debt levels the reader should be able to gain some insight of pro and cons of those strategies. As always with comparision it is the idea to learn lessons. In order to do this it will be necessary to model the two different approaches and underly those models with empirical data. Based on a simple model a projection of future debt scenarios and the success of those strategies should become tractable.
| Unemploment rate
| Inflation rate
- Increase of Value added Tax - yes or no?
- Inflation above zero line?
- GDP growth above 1%?
In case all three questions are answered with yes in 2014 the above mentioned scenario is very likely. In case not the situation will worsen. In this case the exchange rate will deteriorate agains the yen. My forecast for 2015 would be then YEN/EUR at a level of 150 or even higher.
Debt/GDP ratio development: