Yen Moves on Kuroda’s Old Words
An interview with Bank of Japan Gov. Kuroda that moved the yen turns out to be from mid-June.
BBC Radio 4 isn’t exactly known for moving markets. Then again, with investors on tenterhooks about central banks everywhere, why not? The British radio service, usually the domain of arty and intellectual takes on the world, broadcast a radio documentary on Thursday exploring the ideas behind extreme monetary policy, hosted by the journalist Martin Wolf.
In it, Bank of Japan Gov. Haruhiko Kuroda doused water on hopes that he was on the verge of even more extreme monetary policy. “No need and no possibility for helicopter money,” said Mr. Kuroda.
The yen, which has been weakening on expectations that the helicopter engines were starting to turn, strengthened more than 1% when the comments trickled out. The BOJ next meets July 28 and 29.
The program, which doesn’t mention when the interview took place, wasn’t meant to be a last minute bit of signaling from Mr. Kuroda before next week’s meeting. It was conducted in mid-June, according to BBC Radio 4 Producer Sandra Kanthal. What he said isn’t so different from comments he made in April to The Wall Street Journal.
Mr. Kuroda is famous for head faking markets, denying in January that he would use negative rates days before launching them. So perhaps he’s being coy about what the BOJ might do at its next meeting. But investors shouldn’t get too excited about that either.
“The basic idea of helicopter money is to combine fiscal policy with monetary policy. Again, as you know in developed countries, basically fiscal policy is decided by the government and the parliament, while monetary policy is decided and implemented by the central bank, which is independent from the government. I think this institutional setting has been made learning from the long, somewhat turbulent history of central banking and public finance in those countries. So I don’t think at this stage we should abandon this institutional setting. No need and no possibility for helicopter money.
“At this moment, the Bank of Japan has three options with quantitative and qualitative easing, with negative interest rates. Because if necessary we can expand quantity, as well as further change and expand quality and also we can further deepen into negative territory of the interest rates imposed on part of the current account deposits by commercial banks. So we have a very powerful policy framework and I don’t think there is significant limitation of further easing monetary conditions in Japan if necessary.”