Rise of the Japanese fiscal state
AbstractA sustainable fiscal state needs to have two critical factors: A stable tax base and access to an efficient bond market. The Tokugawa Shogunate had a stable land tax revenue, which was inherited to modern Japan after the Meiji restoration. Taxation, however, was restricted by the constitution after the Meiji restoration. The parliament opposed to expansionary policy in the early 1890s, and then it turned to support that at the exchange of governmental commitment to investment in social infrastructure. The government committed to investment to increase productivity, and was allowed to raise tax rate. About the bond market, at the other hand, the government had issued bonds only in the domestic market until the mid 1890s. In the late 1890s, after Japan joined the international gold standard, the government began to issue considerable amount of bonds, and the balance surged during the Russo-Japanese war in 1904-1905. Now the London market efficiently financed Japanese government. In the early 20th century, the government was one and only one player that had established its own reputation in the international financial market. Hence balance of Japanese government bonds was the only route to import capital. This route also provided Japanese economy with macroeconomic stability, offsetting short-term current account deficit by import of capital. Japan had finally been equipped with necessary instruments as a stable and sustainable fiscal state.
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Bibliographic InfoPaper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 08-12.
Length: 32 pages
Date of creation: Mar 2008
Date of revision:
Fiscal state; government bonds; macroeconomic stability;
Find related papers by JEL classification:
- N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East
- N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-04 (All new papers)
- NEP-HIS-2008-04-04 (Business, Economic & Financial History)
- NEP-MAC-2008-04-04 (Macroeconomics)
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