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Restoring Japan's Fiscal Sustainability

Author

Listed:
  • Randall S. Jones

    (OECD)

  • Satoshi Urasawa

    (OECD)

Abstract

With gross government debt surpassing 200% of GDP, Japan’s fiscal situation is in uncharted territory. In addition to robust nominal GDP growth, correcting two decades of budget deficits requires a large and sustained fiscal consolidation based on a detailed and credible multi-year plan that includes measures to control spending and raise revenue. On the spending side, reforms to contain ageing-related outlays are the priority, while the consumption tax should be the main source of additional revenue, given that its impact on economic activity is less negative than other taxes. The plan should target a primary budget surplus large enough to stabilise the public debt ratio by 2020. The fiscal policy framework should be improved to help reinforce confidence in Japan's fiscal position and prevent a run-up in interest rates. Higher consumption taxes should be accompanied by well-targeted social spending, including the introduction of an earned income tax credit, to prevent a rise in inequality and poverty. This Working Paper relates to the 2013 OECD Economic Survey of Japan (www.oecd.org/eco/surveys/japan) Rétablir la viabilité des finances publiques au Japon Avec une dette publique brute dépassant 200 % du PIB, les finances publiques japonaises sont en territoire inconnu. Outre une forte croissance du PIB nominal, il faudra, pour remédier à deux décennies de déficit budgétaire, un assainissement important et soutenu des finances publiques dans le cadre d’un plan pluriannuel détaillé et crédible qui comprenne des mesures visant à limiter les dépenses et accroître les recettes. S’agissant des dépenses, la priorité est donnée aux réformes destinées à contenir les dépenses liées au vieillissement, et l’impôt sur la consommation devra constituer la principale source de recettes supplémentaires puisqu’il a, sur l’activité économique, une incidence moins négative que les autres impôts. Le plan devra viser un excédent budgétaire primaire suffisant pour stabiliser le ratio d’endettement d’ici 2020. Le cadre de la politique budgétaire devra être amélioré pour aider à renforcer la confiance dans les finances publiques japonais et éviter une remontée rapide des taux d’intérêt. La hausse de l’impôt sur la consommation devra s’accompagner de dépenses sociales bien ciblées, notamment d’une réduction de la fiscalité dur travail, pour empêcher une aggravation des inégalités et de la pauvreté. Ce Document de travail a trait à l’Étude économique de l’OCDE du Japon, 2013 (www.oecd.org/eco/etudes/japon).

Suggested Citation

  • Randall S. Jones & Satoshi Urasawa, 2013. "Restoring Japan's Fiscal Sustainability," OECD Economics Department Working Papers 1050, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1050-en
    DOI: 10.1787/5k46cvtkbf33-en
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    References listed on IDEAS

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    Cited by:

    1. Heller, Peter S., 2016. "The challenge of an aged and shrinking population: Lessons to be drawn from Japan’s experience," The Journal of the Economics of Ageing, Elsevier, vol. 8(C), pages 85-93.
    2. Brieuc Monfort, 2015. "Can Increased Public Expenditure Efficiency Contribute to the Consolidation of Public Finances in Japan?," Working Papers halshs-01548620, HAL.

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