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Strong euro risks turning EU Japanese

TOKYO – On any list of economies that risk “turning Japanese,” the Eurozone often places near the very top and deservedly so.

After a decade of secular stagnation, negligible yields despite runaway public borrowing and banks veering from one credit event to the next, the risks of a Japan-like funk are altering Europe’s trajectory. And reorienting priorities at European Central Bank (ECB) headquarters 9,300 kilometers from Tokyo.

As 2021 unfolds, officials in Frankfurt are realizing a perennial Bank of Japan problem is now theirs too: a currency that is against all odds strong and that is creating fresh economic headwinds at the worst possible moment.

In recent days, news reports from Bloomberg and others paint ECB President Christine Lagarde’s team redoubling efforts to understand and address the euro’s brawn versus the US dollar. Its counterintuitive strength is making it ever harder for the economic bloc to withstand already intense Covid-19 economic fallout.