Europe’s Markets vs Japan’s: Parallels and Differences

Europe’s slow economic growth and low inflation have led many market watchers to wonder if the region is at risk of “Japanification,” a process of becoming like Japan’s economy over the last two to three decades. Sharon Bell of Goldman Sachs Research explains the parallels between the regions. “After the global financial crisis, [Europe] went through a period of having to recapitalize the banks,” she says in the latest episode of The Long & Short of It. “That’s exactly what you saw in Japan, after the early 1990’s asset bubble burst.” In terms of what lessons investors can take from Japan’s “lost decade,” Bell points to specific sectors of Japan’s market, such as exports and growth defensives, which performed consistently well. In Europe’s case, Bell says that many of its industries have significant international exposure, and its leadership position in renewables is another area set up for strong growth.