TD’s Cooper Says Japan Helicopter Money Possible on Slow Growthby
Further central-bank stimulus possible in next 12-18 months
Helicopter money could create ‘challenging environment’
Japan may introduce helicopter money to stimulate growth as soon as this time next year, according to Toronto-Dominion Bank’s Bruce Cooper.
The Bank of Japan may begin financing state spending directly as current stimulus measures fail to stimulate growth, TD Asset Management’s chief investment officer, who oversees more than C$306 billion ($234 billion) in assets, wrote Monday in a note to clients. While it would raise the possibility of other countries to following suit, Cooper doesn’t see the policy tool making its way to North America and Europe anytime soon.
"For fixed-income investors, aggressive fiscal stimulus and/or helicopter money would likely create a challenging environment," Cooper wrote. "Investors can benefit from tuning out some of the short-term noise, taking a long-term view of their investments and holding a well-diversified portfolio of high-quality assets."
Investors around the world are beginning to question the efficacy of quantitative easing, speculating that policy makers from Japan to Europe to the U.S. will be forced to turn to new forms of monetary stimulus to revive growth and spur inflation. Both the European Central Bank and the BOJ have signaled recently that there may be limits to the effectiveness of bond buying and negative interest rates, but BOJ Governor Haruhiko Kuroda eliminated the possibility of helicopter money at the bank’s September meeting.
Given this ongoing uncertainty, TD Asset Management maintains its recommendation of a mix of developed-market sovereign and corporate bonds, high-quality North American stocks, and allocations of cash and gold, Cooper said.