IDEAS home Printed from https://ideas.repec.org/a/hit/ecorev/v65y2014i3p238-249.html
   My bibliography  Save this article

The Japanese Fiscal Policy and Tax System during the Lost Two Decades

Author

Listed:
  • Iwaisako, Tokuo

Abstract

After the global recession prompted by US financial crisis in 2008, the perceptions of economists and policy makers of the fiscal policy's effectiveness has drastically changed. Extreme austerity has lost popularity. The effectiveness of fiscal stimulus, especially at the time of economic crisis, now receives more positive evaluation. In this article, we reconsider the evolution of Japanese tax system and fiscal policy in the lost two decades since the 1990s based on such a post-Lehman view on the fiscal policy. First, the examination of contents of the government spending and government investment in recent years suggests that the Japanese government used them as means of income redistribution across regions, downplaying economic efficiency. Existing empirical studies suggest that this is the major reasons that the efficacy of fiscal stimulus package has declined. Second, there was a major structural changes in Japanese tax system during the 1990s, namely flattening of the income tax schedule and an increase of the indirect tax share in total tax revenue. Because of these changes, the Japanese government's tax revenue became less variable and its correlation with business cycle declined. This paper provides empirical evidence for these claims and shows that the function of the built-in stabilizer declined during the 1990s. In evaluating the effectiveness of Japan's fiscal policy in the lost two decades, it is important to take these considerations into account.

Suggested Citation

  • Iwaisako, Tokuo, 2014. "The Japanese Fiscal Policy and Tax System during the Lost Two Decades," Economic Review, Hitotsubashi University, vol. 65(3), pages 238-249, July.
  • Handle: RePEc:hit:ecorev:v:65:y:2014:i:3:p:238-249
    DOI: 10.15057/27359
    as

    Download full text from publisher

    File URL: http://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/27359/keizaikenkyu06503238.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.15057/27359?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H6 - Public Economics - - National Budget, Deficit, and Debt

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hit:ecorev:v:65:y:2014:i:3:p:238-249. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Digital Resources Section, Hitotsubashi University Library (email available below). General contact details of provider: https://edirc.repec.org/data/iehitjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.