Kuroda Says BOJ to Add Stimulus If Needed, Cites Heli-Money Ban

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Haruhiko Kuroda

Photographer: Akio Kon/Bloomberg
  • Notes that monetary and fiscal combination can help economy
  • Lessons of history produced ban on direct debt underwriting

Bank of Japan Governor Haruhiko Kuroda reiterated that the central bank is prepared to step up stimulus if needed, while noting again that so-called helicopter money is prohibited.

“We have said we will check risks in the economy and prices and expand monetary stimulus if it’s needed to achieve our price stability target at the earliest time possible,” Kuroda told reporters on Saturday in Chengdu, China, where he’s attending a Group of 20 meeting. Speaking less than a week before the next BOJ policy decision, he said he would present an assessment of Japan’s economy and monetary policy to his counterparts.

Most economists see the BOJ stepping up its stimulus on July 29 as diminished expectations for inflation leave little prospect of achieving the 2 percent inflation target by the current objective of the 2017 fiscal year. Speculation of some radical new step surged earlier this month, when Kuroda and Prime Minister Shinzo Abe held separate meetings with former Federal Reserve Chairman Ben S. Bernanke, who’s famous for comments on “helicopter money.”

For a QuickTake explainer on helicopter money, click here

“If the words ‘helicopter money’ mean the direct underwriting of government debt or managing fiscal and monetary policy as one consolidated measure, that is forbidden in developed nations -- including Japan -- from the lessons of history,” Kuroda said Saturday. In an interview recorded last month that was broadcast by BBC Radio 4 Thursday, he had said at this stage there was “no need and no possibility for helicopter money.”

At the same time, Kuroda highlighted the usefulness of combining monetary and fiscal stimulus. The Abe administration is currently compiling a fiscal package aimed at strengthening growth, which has remained patchy in recent years despite the Abenomics reflation effort.

“It’s not strange that, as a macroeconomic policy, a government implements fiscal measures while accommodative monetary policy is conducted by a central bank,” Kuroda said. “That will enlarge the boost to the economy. That’s what often called a policy mix.”

The BOJ and Japan’s government in January 2013 pledged in a joint statement to achieve 2 percent inflation. In the Abenomics initiative, monetary and fiscal efforts form the first two of three “arrows” aimed at reviving the economy, with structural reform being the third.

The BOJ chief repeated Saturday his view that Japan’s virtuous economic cycle is continuing, and that the economy is in a gradual recovery phase. Capital spending is relatively solid, and the BOJ’s measure of consumer prices is rising, he said. 

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