Japan's Fiscal Policies in the 1990s

14 Pages Posted: 6 Jun 2003

See all articles by Toshihiro Ihori

Toshihiro Ihori

University of Tokyo - Faculty of Economics

Toru Nakazato

Sophia University

Masumi Kawade

University of Tokyo - Faculty of Economics

Abstract

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.

Suggested Citation

Ihori, Toshihiro and Nakazato, Toru and Kawade, Masumi, Japan's Fiscal Policies in the 1990s. Available at SSRN: https://ssrn.com/abstract=411349

Toshihiro Ihori (Contact Author)

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

Toru Nakazato

Sophia University

Tokyo, 102
Japan

Masumi Kawade

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

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