Japan: Architect of “Bazooka” Monetary Stimulus Wants Bolder Action

How do Japan's financial authorities finally get rid of the threat of deflation?

Well, a former Bank of Japan official provides his answer.

Here's an excerpt from a Feb. 2 Reuters article:

With interest rates already ultra-low, Japan must switch to bolder fiscal spending to pull itself out of economic stagnation, said Kikuo Iwata, the central bank's former deputy governor and architect of its "bazooka" monetary stimulus.

As a vocal advocate of aggressive monetary easing, Iwata provided the academic backbone of Bank of Japan Governor Haruhiko Kuroda's massive asset-buying scheme deployed in 2013 that aimed to accelerate inflation to 2% in roughly two years.

Iwata, who left the BOJ in 2018, now believes monetary policy should take a backseat as slashing long-term interest rates from already low levels would cripple regional lenders and risks destabilising Japan's banking system.

"It would be difficult for the BOJ to cut rates further due to concern over the impact on Japan's financial system," said Iwata, who joined the BOJ board with Kuroda back in 2013.

"There is not much the BOJ can do beyond containing any spike in interest rates. Fiscal policy should take the front seat," he told Reuters in an interview on Tuesday.

Interestingly, as Japan's financial authorities aim to overcome "economic stagnation," stock market investors are anything but lethargic.

As Elliott Wave International's January Global Market Perspective says:

Retail investors made up an average of 21% of total trading value on the Tokyo Stock Exchange in the past six months, versus just 16% the year earlier... New classes of investors have discovered the stock market. Japanese online broker Rakuten Securities says about 40% of its new customers are female, 73% of whom have "no investing experience." Something similar happened in the U.S. in the late 1990s. Look up "Beardstown Ladies" on Wikipedia.