Last week, Sir Mervyn King added to the gloom by saying that the eurozone woes are creating a “spiral” characteristic of a systemic financial crisis.
It would appear that the Bank of Japan is similarly concerned that we could be in for a shock of Lehman-like proportions.
This from deputy governor Hirohide Yamaguchi:
At present, in Europe, a rapid adverse feedback loop seen during the Lehman shock has not been generated, but the adverse feedback loop of the fiscal situation, the financial system, and economic activity seems to have started to act.
On the back of the sovereign debt problem in Europe, there are factors that are essentially common to the Lehman shock. Namely, against a backdrop of accommodative financial conditions in the mid-2000s, a rise in asset prices, and optimistic growth expectations, financial and economic imbalances have been accumulated.
Happy days indeed.