Bank of Japan comes up with ‘helicopter money’ policy

Bank of Japan which adopted a negative interest rates recently, this time most likely will adopt "Helicopter money" a term which was coined by Milton Friedman in 1969. The theory in its purest theoretical form, would involve giving cash directly to residents in order to stimulate growth. However, in today's context, "helicopter money’’ has to be a kind of monetary policy and fiscal policy coming together as one thing.

Bank of Japan, adopted negative interest rates majorly for distracting the people from keeping money in the banks, as a effect of which people may invest in the capital markets, so that liquidity is maintained and money keeps on flowing in the economy.BoJ, will be the first bank to adopt such a policy.

The Japanese economy is struggling from the last 2 decades. Even after adopting a negative interest rate the economy has failed to recover from deflation. Further, adding to worries BREXIT effect has appreciated Japanese yen making the country's exports competitive.

Japan looks quite confident as regards the policy as it aims to end the deflation in the economy. Monetary policy and fiscal policy is also expected to be in place. It could be further interesting to see, whether Japan manages to come out of the deflationary pressure.