{"id":39541,"date":"2016-07-28T16:00:00","date_gmt":"2016-07-28T20:00:00","guid":{"rendered":"http:\/\/www.ino.com\/blog\/?p=39541"},"modified":"2016-07-28T14:05:12","modified_gmt":"2016-07-28T18:05:12","slug":"boj-ready-for-helicopter-money","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2016\/07\/boj-ready-for-helicopter-money\/","title":{"rendered":"BoJ Ready for Helicopter Money?"},"content":{"rendered":"<p style=\"margin: 0 0;\"><img loading=\"lazy\" decoding=\"async\" src=\"\/\/www.ino.com\/blog\/wp-content\/uploads\/2014\/12\/LiorAlkalay_Contributor_ImageBadge350.png\" alt=\"Lior Alkalay - INO.com Contributor - Forex\" width=\"350\" height=\"131\" class=\"alignleft size-full wp-image-30498\" style=\"padding-top: 10px;\" srcset=\"https:\/\/www.ino.com\/blog\/wp-content\/uploads\/2014\/12\/LiorAlkalay_Contributor_ImageBadge350.png 350w, https:\/\/www.ino.com\/blog\/wp-content\/uploads\/2014\/12\/LiorAlkalay_Contributor_ImageBadge350-300x112.png 300w, https:\/\/www.ino.com\/blog\/wp-content\/uploads\/2014\/12\/LiorAlkalay_Contributor_ImageBadge350-270x100.png 270w\" sizes=\"(max-width: 350px) 100vw, 350px\" \/><\/p>\n<p style=\"margin: 0 0;\"><br style=\"clear:both;\"><\/p>\n<p>Helicopter money, that\u2019s the big talk in the past week. The term helicopter money refers to a case where the government hands out money to citizens and funds it through printed money. The last time helicopter money was relevant was back in 2009. That\u2019s when Ben Bernanke, then Federal Reserve Chairman, literally opened up the printing press and poured massive amounts of liquidity into the bond market, in tandem with a massive fiscal stimulus plan from the US government. Now, investors are speculating that the BoJ is ready to unleash a similar move, in coordination with the Abe government. And with the BoJ monetary policy meeting scheduled for this Friday, investors have high hopes. Are these hopes in place? <\/p>\n<h2 style=\"color: #003380; font-size: 17px;\">Kuroda Vs. Abe<\/h2>\n<p>In the past several months, BoJ watchers have been routinely underwhelmed by the BoJ\u2019s statements. The BoJ slashed deposit rates to -0.5% and increased its QE program to a whopping \u00a580 Trillion. But since those two announcements deflation has returned, yields on Japanese Government Bonds plunged to record lows and Japan\u2019s GDP growth marked a modest 0.1% annually. And still, no monetary bazookas have been announced.<!--more--> The BoJ Governor, Haruhiko Kuroda, seems reluctant to add more firepower. But during the past few meetings, there is one mantra that Mr. Kuroda has kept repeating\u2014that monetary stimulus should come in tandem with fiscal stimulus. Kuroda wants the Japanese government, under Shinzo Abe\u2019s leadership, to lean in with more fiscal stimulus in order to \"help revive the Japanese economy.\u201d <\/p>\n<p>Kuroda\u2019s message is clear: <em>So long as the Japanese government does not embark on fiscal stimulus, the BoJ will refrain from further action.<br \/>\n<\/em><\/p>\n<p>And this brings us to this week, Shinzo Abe the Japanese Prime Minister, announced the intent of the Japanese government to <a href=\"http:\/\/www.cnbc.com\/2016\/07\/27\/shinzo-abes-fiscal-stimulus-talk-puts-onus-on-bank-of-japan-to-ease.html\" target=\"_blank\">deploy trillions<\/a> of Yen in fiscal stimulus. Since Mr. Abe made this announcement, no binding decision has been made. The stimulus is likely to be approved only in September. The BoJ Governor might decide to take a wait-and-see approach. After all, Abe\u2019s government had promised overwhelming fiscal action before but its actions fell short. If Kuroda decides to take action and the government fails to pass a significant stimulus package, then Kuroda might be accused of jumping the gun. <\/p>\n<p>Some point to Kuroda\u2019s record as BoJ Governor and, specifically, his tendency to surprise. It\u2019s true; Kuroda is known for his fondness for a surprise action (or inaction as the case may be), but so far, those surprises failed to deliver long-term results, and Kuroda knows that quite well. Hence, the greater likelihood is that Kuroda will wait for Abe\u2019s government to announce fiscal stimulus plans before following suit with another round of monetary stimulus. <\/p>\n<h2 style=\"color: #003380; font-size: 17px;\">What if the BoJ Acts?<\/h2>\n<p>If the BoJ decides to forgo the actual approval of government stimulus and unleash more easing it will be a very clear sign\u2014a sign that the BoJ and the Japanese government have reached some sort of understanding, i.e. a return of a coordinated policy between the two. Fiscal stimulus will be likely to follow, and the Yen will resume its long-term bearish trend against the Dollar. <\/p>\n<h2 style=\"color: #003380; font-size: 17px;\">What if the BoJ does not Act?<\/h2>\n<p>The more likely scenario, of course, is that Kuroda decides to sit on the fence and not act. The focus will move into Kuroda\u2019s rhetoric. If Kuroda signals a willingness to unleash more easing, with the condition of fiscal stimulus first, the Yen might still turn softer against the Dollar. However, the move is likely to be more modest in the immediate term, and investors\u2019 attention will likely shift back to the US economy and the Fed. Nevertheless, other \u201csofter\u201d currencies, such as the Euro or the AUD, could lose ground because, after all, fiscal stimulus hinges on Japanese politics which is not always straightforward. <\/p>\n<p>Look for my post next week.<\/p>\n<p>Best,<br \/>\n<a href=\"http:\/\/www.ino.com\/blog\/meet-lior-alkalay\/\" target=\"_blank\">Lior Alkalay<\/a><br \/>\nINO.com Contributor - Forex<\/p>\n<p><span style=\"font-size: 12px; font-style: italic;\">Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.<\/span><\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>Helicopter money, that\u2019s the big talk in the past week. The term helicopter money refers to a case where the government hands out money to citizens and funds it through printed money. The last time helicopter money was relevant was back in 2009. That\u2019s when Ben Bernanke, then Federal Reserve Chairman, literally opened up the [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":20,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6920],"tags":[6947,8390,7009,7671,8528,8391,7561,2279,6826,6926,6815,8392],"class_list":["post-39541","post","type-post","status-publish","format-standard","hentry","category-ino-com-contributors","tag-abenomics","tag-dollar-yen-trade","tag-eurozone","tag-haruhiko-kuroda","tag-helicopter-money","tag-japanese-government-bonds","tag-japanese-prime-minister-shinzo-abe","tag-japanese-yen","tag-japanese-yen-jpy","tag-lior-alkalay","tag-the-bank-of-japan-boj","tag-zew-economic-index"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>BoJ Ready for Helicopter Money? - INO.com Trader&#039;s Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/wwwtest.ino.com\/blog\/2016\/07\/boj-ready-for-helicopter-money\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"BoJ Ready for Helicopter Money? - INO.com Trader&#039;s Blog\" \/>\n<meta property=\"og:description\" content=\"Helicopter money, that\u2019s the big talk in the past week. The term helicopter money refers to a case where the government hands out money to citizens and funds it through printed money. The last time helicopter money was relevant was back in 2009. 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