With inflation close to zero and growth averaging only around 1 percent, Europe was at risk of a prolonged Japanese-style stagnation with zero to 1-percent nominal growth compared to 4 to 5 percent in the United States. If this situation persists, the euro could take the place of the yen as the world’s strongest currency. This assumes Japan can successfully hit its new policy target of 2-percent inflation and Europe continues to miss the 2-percent mark. If Japan lapses back into deflation, it would join the Eurozone as a strong-currency, stagnant economy.
