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Japan's Fiscal Policies in the 1990s
Author(s) -
Ihori Toshihiro,
Nakazato Toru,
Kawade Masumi
Publication year - 2003
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/1467-9701.00525
Subject(s) - economics , fiscal policy , consolidation (business) , fiscal sustainability , fiscal union , macroeconomics , debt , fiscal imbalance , recession , new keynesian economics , fiscal multiplier , keynesian economics , monetary economics , government spending , economic policy , monetary policy , finance , welfare , market economy
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.