Japan's Fiscal Policies in the 1990s
| Autor: | Toru Nakazato, Toshihiro Ihori, Masumi Kawade |
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| Rok vydání: | 2003 |
| Předmět: | |
| Zdroj: | The World Economy. 26:325-338 |
| ISSN: | 1467-9701 0378-5920 |
| DOI: | 10.1111/1467-9701.00525 |
| Popis: | This paper first summarises Japan’s fiscal policies in the 1990s. Then, we investigate the macroeconomic impact of government debt and the sustainability problem. We find that the Keynesian fiscal policy in the 1990s was not effective and fiscal sustainability may therefore become a serious issue. We also estimate the optimal level of deficits and evaluate fiscal reconstruction movements. It is shown that the actual deficit exceeded the optimal level in the late 1990s. We then inspect fiscal reconstruction movements in the Hashimoto Administration in 1997 and find that the major factor of recession in 1997 was not fiscal consolidation. An important lesson from Japan’s fiscal policies in the 1990s is that long-run structural reform is more important than short-run Keynesian policy. APAN’S fiscal situation in the 1990s was the worst of any G7 country, having deteriorated rapidly with the collapse of the ‘bubble economy’ in 1991 and the deep and prolonged period of macroeconomic recession which ensued, and from which recovery has been slow and modest despite the implementation of counter-cyclical Keynesian policy. In order to evaluate the recent movement of fiscal policies in Japan, it is useful to consider the following points. How did the counter-cyclical Keynesian policy such as raising public expenditures and reducing taxes matter in the 1990s? Has fiscal sustainability become a serious issue? Is it really necessary to reduce fiscal deficits? How much was the optimal deficit in the 1990s? Did the fiscal reconstruction movement in 1997 cause the recession? Why did it fail? This paper will address these issues. Let us first summarise briefly the recent movement of fiscal deficits and fiscal reform in the 1990s. After the ‘bubble economy’ was broken in 1991, the resulting tax decreases reduced revenue. At the same time the politico-economic pressures for larger expenditure budgets and counter-cyclical packages of fiscal measures intensified. Responding to them, the Ministry of Finance (MOF) employed several measures for stimulating aggregate demand. However, as will be shown in Section 2, these counter-cyclical Keynesian measures were not especially effective and resulted in an increase in the fiscal deficit. The planned bond-dependency rate rose from a low-point of 7.6 per cent in fiscal year (FY) 1991 (initial) to 18.7 per cent in FY 1994 (initial). The reality was still worse. The implementation of counter-cyclical fiscal policy through supplementary-budgets in-year led to further borrowing still, and the actual bonddependency rate was more than 22 per cent in FY 1994. |
| Databáze: | OpenAIRE |
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