Reflecting this is a large current account deficit which does not bode well for the currency in the longer term. However, they are not predicting a large share market decline although increased volatility and sharp corrections are likely. While having mediocre outlook for the USA, Dresder were much more bullish about Japan. The backgound to Japan's problems, in particular rising unemployment, rising savings rates and asset deflation are well documented. As people reduce spending to save they reduce other people's incomes and they then cut spending.
Incomes collapse and so do spending and saving.
This is the so called 'paradox of thrift'. Employment is rising and so is business optimism. Japanese economic recovery has certainly been reflected in that share market with the Nikkei DJ and other indicies rising sharply this year. They are expecting German exports to improve in terms of volume as US growth continues and Japan growth picks up. German export prices are also expected to firm as the price of competing Japanese exports rises.