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In The erroneous ‘lets have a little, some or no MMT’ narrative


Bill Mitchell-en Japan shows the way – again

(i) Gastu fiskala

I read a Reuters report earlier this week (February 18, 2019) – Architect of BOJ stimulus calls for big fiscal spending backed by central bank – that quoted the former Bank of Japan’s deputy government as saying that:

Japan must ramp up fiscal spending with debt bank-rolled by the central bank


To stimulate growth.

The former Deputy Governor, Kikuo Iwata was the “architect of the BOJ’s massive bond-buying programme dubbed ‘quantitative and qualitative easing’ (QQE)” said that without stronger growth in household consumption spending, inflation will continue to “miss the central bank’s 2 percent target”.

I wonder whether ECB officials are taking heed!

(ii) Politika monetari0a eta fiskala

Mr Iwata confirmed that monetary policy was no longer capable of any further stimulus in its own right.


The nation “must lean on fiscal policy by ditching this year’s scheduled sales tax hike and committing to boost government spending permanently with money printed by the BOJ”.

He said that:

Fiscal and monetary policies need to work as one, so that more money is spent on fiscal measures and the total money going out to the economy increases as a result … That’s the only remaining policy option.

He rejected a strategy that would rely “on commercial banks to lend more to already cash-rich companies”.

They are not going to spend (invest) even with cheap credit if the goods market is not more viable, which means household consumption has to be stimulated.

How might fiscal policy do that?

Well the ‘printing money’ terminology is incorrect. Governments do not spend by printing money. They credit bank accounts.

In this case, Mr Iwata suggested policies such as cash payments (and tax cuts) to “younger-generation households”.

If you think about this for a moment, his strategy would not constitute anything that is not already being done in Japan.

(iii) Bonoak, EBZ eta gobernu defizitak

At present the Bank of Japan is buying up large volumes of Japanese Government Bonds in order to maintain long-term interest rates around zero.

Mr Iwata is suggesting, effectively, they keep doing this but in larger volumes, with one difference.

The current Bank of Japan management claim they are not directly backing government deficits because they are “bonds from financial institutions, and not directly from the government.”

In other words, they are buying them in the secondary market one the Ministry of Finance has released them into the economy via the primary issue.

This is the same ruse that the ECB uses to avoid admitting (the obvious) that they are funding government deficits in the Eurozone and thereby acting illegally with respect to the Treaty prohibition of ‘bailouts’.

The fact is that it is a fine line.

(iv) Bidea erakutsiz

The primary dealers know that once they purchase the government debt in the primary issue they can easily off load it in the secondary markets at a profit because demand their is high courtesy of the central bank quantitative easing programs.

In practice it doesn’t really matter then which market the central bank purchases the debteither directly or indirectly – the same outcome is achieved from the government’s perspective.

Mr Iwata is sharp enough to see through the official statements from his former employer.

He told Reuters that:

The term debt monetisation has been taboo in Japan. But in a way, Japan is already resorting to debt monetisation

Not ‘in a way’. Pretty obviously that is what is happening.

What this effectively means is that fiscal policy should be further ramped up in order to stimulate aggregate spending.

Showing the way.

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