USDJPY: Dollar stalled just shy of JPY105 - BBH

Research Team at BBH, notes that the dollar stalled just shy of JPY105 after a press story yesterday suggested that ostensibly after meeting with Bernanke, Japanese officials are considering helicopter money. 

Key Quotes

“This was denied in Japan.  Separately, we note that the Japanese government cut its GDP and inflation forecasts today.  The projection for the current fiscal year's growth was halved to 0.9% from 1.7% and this year's inflation forecast was slashed to 0.4% from 1.2%.  It does not help matters that May industrial output was revised to show a -2.6% decline month-over-month from -2.3%. 

The pessimistic, even if more realistic forecast is part of the case for a substantial fiscal package.  Helicopter money is loosely used but generally refers to the blurring of monetary and fiscal policies.  Some consider that the amount of government bonds being bought by the BOJ while the government runs a budget deficit of nearly 6% of GDP as being already engaged in helicopter money.   

While fiscal stimulus may be helpful for short-run performance alone (complimented with monetary policy), it will not be enough to lift potential growth in Japan.  That is ultimately the problem, and despite the likely renewing of Abe's first two arrows, it still comes back to the missing third arrow, structural reforms.”