Japan should consider more government spending to maximize the impact of monetary policy, an adviser to Prime Minister Shinzo Abe said on Wednesday, indicating a shift in emphasis to fiscal from monetary policy.
Koichi Hamada, long known as a “reflationist” keen to have the Bank of Japan flood the economy with cash to kindle price rises, singled out the role of fiscal stimulus after a recent policy shift by the central bank was taken to mean the BOJ is in no hurry to boost its massive easing.
“Under the current monetary policy of keeping long-term interest rates around zero percent, if interest rates should rise due to more fiscal spending, monetary policy can rein such moves, and crowding out of private investment won’t happen,” Hamada, an emeritus professor of economics at Yale University and adviser to the cabinet, told Reuters in an interview.
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