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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 17, No. 1, pp.1-23
ISSN: 1225-0279 (Print)
Print publication date 29 Feb 2004
Received 02 Feb 2004 Revised 15 Mar 2004

Japan’s Fiscal Policy: Sustainability of Government Deficits

Toshihiro Ihori
Professor, Department of Economics, University of Tokyo, Hongo, Tokyo 113-0033, Japan, Tel: +81-3-5841-5502, Fax: +81-3-5841-5521 ihori@e.u-tokyo.ac.jp

JEL Classification: H61, H62, H63

Abstract

The purpose of this paper is to analysis the Japanese fiscal policy particularly from the viewpoint of the sustainability problem of government bond policy and the fiscal reconstruction movement in Japan. This paper first summarizes Japan's fiscal policies in the 1990s. Then, we investigate the macroeconomic impact of government debt and fiscal difficulties of heavy dependency of debt finance in the public sector. We find that fiscal sustainability may become a serious issue. We also explore political constraints to the fiscal reconstruction movements. In order to realize successful fiscal reconstruction, the central government needs to restrain lobbying activities of local political groups.

Keywords:

Japan's fiscal policy, Sustainability, Deficits

Acknowledgments

An earlier version of the paper was presented at the Conference on February 2, 2004, Seoul, Korea. I would like to thank Joon Koo Lee and other participants for their useful comments.

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