Refreshing to see IMF revisiting old taboos

THE International Monetary Fund (IMF) is revisiting some old taboos - including the proscription against government debt monetisation by central banks and the prejudice against state-mandated incomes policies - to see whether it might be better to ignore these shibboleths, even if a certain amount of risk is involved.

Debt monetisation, whereby a central bank underwrites new government debt at the time of issue and takes the risk on its own balance sheet, is already being practised in Japan according to some IMF thinking. The Bank of Japan (BOJ) is buying more debt than is needed to finance the fiscal deficit.

The subject of debt monetisation more generally is currently under study by the IMF, according to authoritative sources, and a report should be issued soon. Ditto in the case of incomes policies, which again has particular relevance to Japan, although to many other countries too.