The BS Filter: BOJ Nonsense & Helicopter Money Speculation

Takeaway: Here's our take on some of today's top financial stories.

The BS Filter: BOJ Nonsense & Helicopter Money Speculation - Central banker cartoon 03.03.2015

THIS IS ALL GETTING RATHER SILLY...

 

The mainstream media continues to cite "back room" musings of conflicting Japanese officials and their views on helicopter money.

 

According to Reuters: "There is no chance Japan will resort to 'helicopter money' any time soon, government and central bank officials directly involved in policymaking told Reuters on the condition of anonymity."

 

Those unidentified Japanese goverment officials eagerly dismissed the notion of helicopter money. Below are a selection of their comments:

 

  • "Adopting helicopter money in the strict sense is impossible as it's prohibited by law," said one of the officials. "If it's about the BOJ buying huge amounts of bonds and the government deploying fiscal stimulus, we're already doing that."
  • "It's an illusion to think that a country can spend as much money as it wants, without having to pay it back," said another official on condition of anonymity.
  • "I haven't heard of any such discussions taking place in the Ministry of Finance," a third source said, adding that adopting helicopter money was "unthinkable."
  • Koichi Hamada, an economic adviser to Prime Minister Abe, told Reuters on Thursday Japan should not resort to helicopter money as it could lose control of inflation.
  • "Resorting to such a step would be sending a grave message to the international community" on Japan's fiscal management, he told Reuters on Thursday. "We need to think carefully about how markets will react if we even signal it as an option." -Masahiko Shibayama, another influential aide to Abe

 

The BS Filter: BOJ Nonsense & Helicopter Money Speculation - Kuroda cartoon 02.18.2015

 

Meanwhile, Bloomberg reports...

 

"Ben S. Bernanke, who met Japanese leaders in Tokyo this week, had floated the idea of perpetual bonds during earlier discussions in Washington with one of Prime Minister Shinzo Abe’s key advisers.

Etsuro Honda, who has emerged as a matchmaker for Abe in corralling foreign economic experts to offer policy guidance, said that during an hour-long discussion with Bernanke in April the former Federal Reserve chief warned there was a risk Japan at any time could return to deflation. He noted that helicopter money -- in which the government issues non-marketable perpetual bonds with no maturity date and the Bank of Japan directly buys them -- could work as the strongest tool to overcome deflation, according to Honda. Bernanke noted it was an option, he said.

 

Though Honda said he thought Japan was already engaged in a strategy that involved helicopter money, he wanted to convey the idea to Abe and asked Bernanke to meet with the premier in Japan. While this didn’t happen in the spring, Bernanke joined central bank chief Haruhiko Kuroda over lunch this Monday and on Tuesday he attended a gathering with Abe and key officials, including Koichi Hamada, another influential economic adviser."

 

The BS Filter: BOJ Nonsense & Helicopter Money Speculation - Japan cartoon 08.10.2015

Whether you believe the rumors or not...

 

OUR TAKE: As Japan's moribund economy continues to flounder, what makes central planners so certain helicopter money will finally pull it out of stagnation? The BOJ is already firing up the monetary printing presses to the tune of ¥80 to ¥90 trillion a year. In other words, the best efforts of Japanese central planners continue to fail. None of this bodes well for Japan.


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