Japan's 'Mr. Yen' Sees Global Recession Lasting Until 2018

In an era where forecasts by permabears have gotten ample attention and vindication, few are as disturbing as this: a world recession until 2018.

It comes from Eisuke Sakakibara, Japan’s former top currency official. He is known as “Mr. Yen” for his ability to move markets. Because Tokyo’s revolving-door politics often sends a new face to each Group of 20 meeting, he is one of the few Japanese constants in market circles. Traders may not know the latest finance minister’s name, but they know Sakakibara.

Japan is the master of muddling along, decade after decade, with little growth to show for it. And Sakakibara was a key player when Japan faced everything from the Asian crisis to Russia’s default to the onset of deflation to a banking collapse that saw the demise of Yamaichi Securities Co.

So, when an economist with Sakakibara’s background says “the world is set for a long-term structural slump reminiscent of the 1870s” when average global annual growth was about 1 percent, I can’t help but listen. The reason for the slowdown? Governments are putting fiscal austerity ahead of restoring stable growth. (more)