The euro zone is heading towards a Japanese-style equilibrium; but does it share the characteristics that make this equilibrium possible in Japan?

The euro zone is heading towards a Japan ese -style equilibrium, with: Zero interest rates at all maturities; A high public debt ratio; A very large central bank balance sheet. This equilibrium has not given rise to a financial crisis in Japan. But will the same be the case in the euro zone? Does the euro zone share the characteristics that make this equilibrium possible in Japan? In particular: Savers’ willingness to hold bonds offering near-zero yields . I t is not certain that this would be sustainable in the euro zone , given that inflation is clearly positive on average in the zone as opposed to zero in Japan; The capacity of the central bank to place o n its balance sheet the necessary quantity of government bonds to keep long-term interest rates at zero . T his is less clear ly the case for the ECB than for the Bank of Japan; Japan’s very strong “financial nationalism” , which prevents the zero interest rates and excess liquidity from leading to capital outflows; Caution among investors and savers, which prevents asset price bubbles, thanks to the memory of Japan’s great crisis from 1990.