Kuroda dismisses helicopter money as ‘impossible’ option due to fiscal restrictions
Bank of Japan Governor Haruhiko Kuroda likes to keep markets guessing by saying one thing and doing another, but, when it comes to ruling out “helicopter money” to reanimate the economy, officials and close associates say he almost certainly means it.
Despite monetary easing on an unprecedented scale over the past three years, data on Wednesday is likely to show Japan’s economy barely grew in the first quarter.
Fears policy makers are out of ammunition has led a growing number of overseas investors to speculate the BOJ might resort to helicopter money – an untested policy in which a central bank permanently expands the money supply that Nobel laureate Milton Friedman likened in 1969 to dropping cash from a chopper.
In practice, such a policy could mean the BOJ printing money to buy debt direct from the government, which would then inject it into the economy through public spending, or accepting perpetual bonds to fund fiscal spending indefinitely.
The BOJ is already helping finance Japan’s huge public debt cheaply by gobbling up government bonds at an annual pace of 80 trillion yen ($737 billion), more than double the amount newly issued each year, but it is buying them in markets.
Kuroda has dismissed helicopter money as an “impossible” option under current law separating the government’s role on fiscal policy from the BOJ’s mandate focused on monetary policy.
The debate has drawn the attention of BOJ officials, some of whom say it is an interesting “theoretical experiment”.
But many BOJ policymakers say it is a long-shot, even amid growing market doubts on how long it can keep buying assets at the current rapid pace or deepen negative interest rates.
“AMPLE” POLICY TOOLS
Kuroda said on Friday the BOJ still had “ample” policy tools available for further easing, such as expanding its asset-buying program or pushing interest rates further into negative territory.
