The head of the Bank of Japan in 2011 raised the alarm about the idea of underwriting Japanese government bonds to support reconstruction from the devastating earthquake and tsunami that year, saying such a practice will eventually become "unstoppable," minutes showed Friday.
Masaaki Shirakawa, who was BOJ governor, warned that the central bank directly financing government spending would risk a sharp rise in inflation and undermine fiscal discipline, citing Japan's past experience decades earlier, according to the minutes of an April 6-7 policy meeting in 2011.
Mindful of the danger of resorting to debt financing even as a "temporary" step, Shirakawa said in retrospect, "The underwriting (of government debt) started as such, because doing so was deemed convenient. But because of this, it became unstoppable and led to a sharp currency depreciation or inflation," the minutes showed.