Japan’s helicopter money is delayed

The mountain shook and out came a mouse. Investors had expected the Bank of Japan (BoJ) to announce radical new monetary easing measures last Friday. Helicopter money printing cash for the government to spend as it likes with no obligation eventually to repay it was touted as a possibility. In the event, the BoJ made only minor adjustments to measures it had already adopted.

It doubled its annual purchases of exchange-traded funds to 6trn, so it will now be pumping around $5bn a month into the equity market. It also doubled the size of a relatively minor dollar lending facility. This helps firms get hold of dollars to use abroad, so it could ensure that Japanese firms' "overseas shopping spree continues", says The Wall Street Journal's Anjani Trivedi. Japanese overseas mergers and acquisitions in 2016 have reached their highest year-to-date total in 20 years.

The BoJ is already buying around $65bn of government bonds per month with printed money. After three years of quantitative easing, it owns over a third of all outstanding government debt. It has also pushed interest rates into negative territory. After last week's announcement, the yen rose owing to the lack of significant stimulus, but stocks climbed too: the government is buying more exchange-traded funds, and banks are being spared even lower negative interest rates, which investors fear will hit bank profits.

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Still, the BoJ's governor, Haruhiko Kuroda, insisted that bond-buying and negative-interest-rate policies had not reached their limit, while investors were also taken aback by the announcement of a "comprehensive assessment" of the impact of these two policies, due at the next meeting in late September. This sounds a bit odd: a central bank is "presumably always doing comprehensive assessments", notes Tivedi. "By being so explicit, it could be a nod to a total rethink" and potentially a harbinger of more radical moves along helicopter-money lines.

Kuroda may have wanted to avoid overshadowing the government's latest fiscal stimulus package, but there is less to that than meets the eye, and it won't turn the economy around. Growth has been lacklustre, and even though the labour market has tightened, there is scant sign of major wage increases so far. Consumer prices are falling at an annual rate of 0.4%, while the BoJ is targeting 2%. Core inflation, excluding food and energy, has slid back to 0.4% recently.

So it seems unlikely that the BoJ is finished yet. Whether in radical form or something more gradual, more monetary stimulus is on the way.