IMF warning on China puts 'Japanization' risk in spotlight
Japan's former top currency diplomat, recalls how Chinese policymakers eagerly studied ways to avert a Japan-style burst of an asset bubble that led to prolonged deflation and economic stagnation — until around 2015.
«Then they stopped. In the past seven to eight years, they seem to be ignoring everything they learned,» said Watanabe, who retains close ties with incumbent policymakers.
«Under the Xi administration, China probably shifted its attention away from economics,» he told Reuters.
Now, China may be paying the price. Inflation is stalling and its deepening real estate crisis was identified as among the biggest risks to global growth during the International Monetary Fund and World Bank meeting being held in Marrakech Oct.
9-15.
The world's second-largest economy is in the spotlight as a country on the brink of «Japanization,» a term describing Japan's 15-year period of low growth and deflation after the burst of an asset-inflated bubble in the late 1990s.
Some Japanese policymakers are voicing concern partly since a prolonged slump in Japan's biggest trading partner will deal a huge blow to their export-reliant economy.
«What's fast emerging is the risk of China slipping into deflation, or the 'Japanization' of its economy,» Bank of Japan (BOJ) board member Asahi Noguchi said on Thursday.
«It's not clear yet whether China is heading toward a situation similar to Japan. But it's true China's real estate sector — the backbone of its economy — is slumping, youth job losses are rising and inflation is weakening,» he said in Japan.
In its World Economic Outlook, the IMF cut China's growth forecast for this year to 5.0% from 5.2% in April, and warned that its property sector crisis could deepen with global
