This idea can be applied to the current situation in Japan. Market interest rates in Japan have been in negative territory across a wide range of maturities due to the effects of the Bank’s “QQE with a Negative Interest Rate.” In this situation, when the government expands fiscal expenditure, its effects of stimulating the economy will be very powerful due to the synergy effects.
This “policy mix” is different from “helicopter money,” which is an expansionary fiscal policy financed by a permanent increase in the central bank’s money, and from “deficit financing,” in which the central bank purchases government debts for the sake of facilitating the government’s financing.