The BoJ should participate in a “helicopter money” scheme with the Japanese government if it hopes to convince investors that underlying growth will pick up, TD Economics says.

The bank says in a note on Tuesday that Japan has been a “case study” in secular stagnation over the past 25 years, with per capital income now about 14% below 1990 levels.

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“It will take bolder stimulus, which needs to be followed through with further structural reforms to break the cycle of false dawns for the Japanese economy,” TD says. “The perception that monetary policy is reaching its limits in Japan has led to speculation about whether Japan would engage in a helicopter drop of money to lift the economy out of its multi-year stagnation.”

Helicopter money is monetary stimulus equivalent to printing money for households. Such a move would support the Japanese government’s plan for fiscal stimulus in the fall, TD says, but since the BoJ cannot legally mail cheques directly to households, helicopter money may instead come in the form of fiscal stimulus funded by the central bank’s purchase of debt issuance.

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“This serves to counteract an increase in the debt burden that would typically raise bond yields,” TD notes. “If the increased fiscal stimulus is accompanied by a corresponding increase in quantitative easing by the BoJ, Japan would effectively be engaging in a helicopter drop – even if officials didn’t call it that.”

TD adds that policymakers are facing an uphill battle with a stronger yen, but a larger and more sustained fiscal package accommodated by central bank purchases could lift demand and inflation expectations.