BOJ Policy on Way to Trigger Fiscal Stimulus

BOJ Policy on Way to Trigger Fiscal Stimulus

29 March 2016, 12:14
Roberto Jacobs

BOJ Policy on Way to Trigger Fiscal Stimulus

Bank of Japan’s (BOJ) massive monetary stimulus may not have boost inflation much so far and economy is struggling to recover post sales tax hike of 5% but it is on its way to boost fiscal policy and lead to the release of fiscal stimulus by the government. If not it has at least triggered a debate among Japanese policymakers.

According to latest data available from ministry of finance, Thanks to Bank of Japan’s (BOJ) monetary policy government saw its debt issuance and servicing cost drop marked, which has already led to savings worth ¥ 80 billion. Its cost likely to drop further as BOJ’s newly introduced negative rates and pushing down yields at longer end of the curve, making is much flatter. For example 10 year yield is hovering around -0.1%. Japanese government is expected to issue debt worth ¥170 trillion this year.

While some in the government suggesting to use the money to reduce Japan’s overhang of debt, which hovers well above 200% of GDP, others are in favor of returning the money as fiscal stimulus to the economy.

Yen is on the other hand is exerting weakness for past eight sessions, trading at 113.7 per Dollar.

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