BOJ's Harada shuns 'MMT' theory proposing unlimited debt bank-rolling

FILE PHOTO: Newly-appointed Bank of Japan (BOJ) board member Yutaka Harada attends a news conference at the BOJ headquarters in Tokyo March 26, 2015. REUTERS/Yuya Shino

NAGASAKI, Japan (Reuters) - Bank of Japan board member Yutaka Harada on Wednesday warned against the idea of propping up the economy through unlimited money-printing to finance government spending.

“If the government issues debt denominated by its own currency, it might not default. But doing so will cause runaway inflation, so the idea won’t work,” Harada said.

“The government could raise taxes or cut spending to control inflation. In reality, however, this will be very hard to do,” he told reporters after meeting with business leaders in Nagasaki, southern Japan.

Harada was referring to “Modern Monetary Theory” (MMT), an idea floated by some U.S. academics to print money unlimitedly to bank-roll government debt for fiscal spending.

Reporting by Leika Kihara