This paper explores the relationship between the political system and fiscal performance, focusing on the prewar Japanese history. Japan experienced substantial changes in the political system as well as fiscal performance, from the late nineteenth century to the end of the Second World War. These experiences provide us with valuable data for empirical analyses regarding implications of the political system on fiscal performance. The political system prescribed in the Meiji Constitution was highly decentralized in the sense that the military were independent of the government and that inside the government each minister directly supported the Emperor. In this framework, the military, bureaucracy and political parties gave strong pressure to expand the budget after the Russo-Japanese War. However, in this period, Genro, powerful leaders who had initiated the Meiji Restoration, played the role of unifying the political system and maintaining fiscal discipline. On the other hand, after the First World War, as the political power of Genro declined, it became difficult to maintain fiscal discipline. It is confirmed that the party cabinet system, which came to be a rule in the 1920s, enlarged the budget. On the other hand, not only the power of the military as a whole increased, but the military also came to be fragmented, which made it more difficult for the fiscal authorities to suppress their budget requests. As a result, the primary balance, which was surplus after the Russo-Japanese War, became deficit in the 1920s, and the deficit increased in the 1930s.
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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE J-Series with number
CIRJE-J-107.