Destination Deflation: Great Britain Closely Follows the Economic Footsteps of Japan

The cultures of the United Kingdom and Japan are as far apart in many ways as the geographic distance between the two nations.

Yet, when Great Britain holds up an economic mirror, the reflection is starting to look like Japan.

This has some British economic observers worried about deflation.

Similarities between the two economies are spelled out in the following excerpt from the British newspaper, The Telegraph.

Both nations suffered a financial crisis that, as economists put it, left them with zombie households (UK) or zombie companies (Japan), and zombie banks.

Policy has also trodden a similar path. Rates have been cut to near zero, central banks have printed money and tried "credit easing," governments have looked to infrastructure to cure slow growth, and there has been a rapid rise in the non-regular workforce – in the UK, part-timers and the self-employed. The young have been disenfranchised.

The UK may have recapitalised the banks faster and started printing money earlier, but policy action has been largely the same. The big difference so far, has been deflation [emphasis added].

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