‘Low rate makes fiscal spending poweful’

Bloomberg

Bank of Japan Governor Haruhiko Kuroda stepped into the global debate about whether governments need to do more heavy lifting to support their economies, saying that the ultra-low interest environment created by Japan’s central bank makes fiscal spending more powerful.
Kuroda said the BOJ wasn’t planning to add to its stimulus in tandem with some form of government spending package, but acknowledged that a policy mix was more effective in stimulating prices and the economy than the central bank acting alone.
“If fiscal policy becomes more aggressive with interest rates at appropriately low levels and continued easing in place under the current yield curve control policy in an overall policy mix, fiscal policy will be more effective,” Kuroda said at a press conference in Nagoya.
The comments come after Mario Draghi used his parting remarks from the European Central Bank last week to again call on governments in Europe to ramp up fiscal spending and share the burden of supporting growth with the ECB.
With the BOJ’s accumulated asset purchases now bigger in size than Japan’s entire economy, Kuroda is closer to the limits of monetary policy than any other major central bank governor. The side effects of his aggressive easing are squeezing the banking sector and warping markets, and the likely impact of adding to stimulus is increasingly being called into question.
While more than 70% of economists surveyed by Bloomberg before the BOJ’s last meeting forecast it to lower interest rates by January, many of them doubt the effectiveness of further action.