Bank of Japan’s Kuroda Rules Out ‘Helicopter Money’ – Reuters

LONDON (Reuters) – Haruhiko Kuroda, Governor of the Bank of Japan, has dismissed the notion of implementing “helicopter money,” which would involve directly financing the budget deficit in an effort to tackle deflation. This statement comes as policymakers in Tokyo are preparing to enhance current stimulus programs.

Japanese markets have experienced gains this month amid speculation that authorities might resort to helicopter money, potentially by issuing perpetual bonds to support public debt, in their struggle to rejuvenate an economy affected by prolonged low inflation.

In a recent interview broadcast by the BBC, Kuroda stated that the central bank has sufficient mechanisms to further ease policy when necessary. He emphasized the importance of maintaining a distinct separation between fiscal and monetary institutions, saying, “I don’t think at this stage we should abandon this institutional setting. No need and no possibility for helicopter money.”

Following his remarks, the yen strengthened, reaching a peak of 116.44 yen per euro, marking a 1 percent rise for the day. A representative from the Bank of Japan noted that Kuroda was reiterating his consistent position, although the date of the interview was not specified.

Additionally, a senior advisor to Prime Minister Shinzo Abe conveyed to Reuters last week that Japan should avoid using helicopter money.

Most economists surveyed by Reuters this week expect the Bank of Japan to implement policy easing later this month, predicting a series of measures aimed at stimulating inflation further.

Kuroda, interviewed in his Tokyo office, outlined three existing policy tools available to the BOJ: quantitative and qualitative easing, along with negative interest rates. He said, “If necessary, we can change the quantity, as well as further change and expand the quality of assets purchased, and also we can further deepen into negative territory of interest imposed on part of the current account deposits from commercial banks.”

He affirmed the BOJ’s robust policy framework, stating, “I don’t think there’s any significant limitation on further easing of monetary conditions in Japan, if necessary.”

In the same BBC program, Andrew Haldane, Chief Economist at the Bank of England, remarked that while low interest rates and bond-buying initiatives since the financial crisis may have contributed to occasional market overheating, there is no indication that this phenomenon has become widespread.