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Local Government Spending: Solving the Mystery of Japanese Fiscal Packages

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  • Hiroko Ishii

    (Peterson Institute for International Economics)

  • Erika Wada

    (Peterson Institute for International Economics)

Abstract

Since the asset-price bubble burst in 1990, the Japanese government has repeatedly announced fiscal measures to boost the economy. The government claims that discretionary fiscal spending from fiscal year 1992 to 1996 (although there was no stimulus measure in 1996) amounted to more than 65 trillion yen: half of that supposed stimulus went to public works, such as construction and infrastructure, and 20 percent of it took the form of tax cuts. Despite these economic measures, Japanese economic growth has been stagnant for more than 6 years, except for 1996, when the Japanese economy grew by approximately 3 percent.3 Why haven't the Japanese fiscal packages worked? The large part of the answer, which we address in this paper, has been the biggest part of the announced packages, namely, public spending.

Suggested Citation

  • Hiroko Ishii & Erika Wada, 1998. "Local Government Spending: Solving the Mystery of Japanese Fiscal Packages," Working Paper Series WP98-5, Peterson Institute for International Economics.
    • Handle: RePEc:iie:wpaper:wp98-5
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    Cited by:

    1. Venturini, Fiorenza, 2016. "Are Estimates of Fiscal Multipliers Truly Reliable? Some Observations Starting from the Case of Japan," Centro Sraffa Working Papers CSWP23, Centro di Ricerche e Documentazione "Piero Sraffa".
    2. Robert Dekle, 2003. "The Deteriorating Fiscal Situation and an Aging Population," NBER Chapters, in: Structural Impediments to Growth in Japan, pages 71-88, National Bureau of Economic Research, Inc.
    3. Dekle, Robert, 2004. "Financing consumption in an aging Japan: The role of foreign capital inflows and immigration," Journal of the Japanese and International Economies, Elsevier, vol. 18(4), pages 506-527, December.
    4. Alan G. Ahearne & Joseph E. Gagnon & Jane Haltmaier & Steven Scott MacDonald, 2002. "Preventing deflation: lessons from Japan's experience in the 1990s," International Finance Discussion Papers 729, Board of Governors of the Federal Reserve System (U.S.).
    5. Kameda, Keigo, 2014. "What causes changes in the effects of fiscal policy? A case study of Japan," Japan and the World Economy, Elsevier, vol. 31(C), pages 14-31.
    6. Alan J. Auerbach & William G. Gale, 2009. "Activist fiscal policy to stabilize economic activity," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 327-374.
    7. Kenneth N. Kuttner & Adam S. Posen, 2002. "Passive Savers and Fiscal Policy Effectiveness in Japan," Working Paper Series WP02-2, Peterson Institute for International Economics.

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