Bank of Japan Governor Haruhiko Kuroda ruled out the idea of using "helicopter money" - or directly underwriting the budget deficit - to combat deflation, as policymakers in Tokyo gear up to expand existing stimulus programmes. Japanese markets have risen this month on speculation that authorities, battling to revive an economy dogged by decades of anaemic inflation, will resort to using helicopter money, possibly issuing perpetual bonds to underwrite public debt.
But in a BBC interview broadcast on Thursday, Kuroda said the central bank already had mechanisms in place to ease policy further if needed, and that Japan should not forfeit a clear separation between fiscal and monetary institutions. "I don't think at this stage we should abandon this institutional setting. No need and no possibility for helicopter money," Kuroda told the radio documentary. The yen shot up after Kuroda's comments, hitting a high of 116.44 yen per euro, up 1 percent on the day.
A BOJ spokesman said Kuroda was reiterating his usual stance. The date of the interview was not clear. Last week a senior advisor to Prime Minister Shinzo Abe told Reuters that Japan should not resort to helicopter money. A majority of economists polled by Reuters this week expected the BOJ to ease policy later this month, forecasting a combination of measures in another attempt to kick-start inflation.
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