Financial Markets and Economic Forecasts 2010

The Business Times assembled a panel of eminent and seasoned experts to review economic and investment prospects.

Anthony Rowley: Welcome to this year-end Investment Round Table as we gather for the last time in 2009 and look ahead to what lies in store in 2010 - the Year of the Tiger in the Chinese zodiac. Some say it is a good year for taking risks, and there seems to be no shortage of those. Prof Sakakibara, would you begin the crystal-ball gazing and tell us what lies in store.

Eisuke Sakakibara: 2010 will be a very difficult year. Among developed countries, including the United States, the economy will be very weak and there is even a possibility of a double-dip recession. In the case of Japan, the likelihood of a double-dip recession is around 50-60 per cent. The situation (in Japan) is very bad at this moment. In the US case, fiscal stimulus will probably continue until the summer of next year but around the end of the year there is a possibility of a double-dip recession. Europe too has a very serious situation. Being a collection of countries, the situation is even more difficult than in the US. European countries have separate policies and economic conditions are different, yet monetary policy is unified.

Deflation is going to continue, not only in Japan but also in the US and Europe, and it may deepen. The so-called 'Japanese disease' is going to be a major malaise among developed countries. The problem is that it's not a monetary phenomenon - it's a structural phenomenon arising mainly from globalisation. So it's very difficult for central banks to control and it will take a long time to work its way through the system.

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