Will a Growth Miracle Reduce Debt in Japan?
Japan has the highest debt to GDP ratio among the developed nations. In addition, the population is projected to age rapidly over the next few decades, which will significantly increase the ratio of government expenditures to GDP. In this paper, we explore the effect of economic growth driven by total factor productivity on Japanese debt in the face of higher future social security expenditures. Our main finding is that a decade of unprecedentedly fast growth of total factor productivity, at an average of 6% per year, is needed in order for Japan to eliminate its debt. Since this is very unrealistic, what is needed is a significant reduction in government expenditures together with an increase in the consumption tax rate, to eliminate debt in forty years.
|Date of creation:||Jan 2011|
|Date of revision:|
|Contact details of provider:|| Postal: 2-1-1 Nihonbashi, Hongoku-cho, Chuo-ku, Tokyo 103|
Web page: http://www.imes.boj.or.jp/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Selahattin Imrohoroglu & Ayse Imrohoroglu & Kaiji Chen, 2006. "The Japanese Saving Rate," American Economic Review, American Economic Association, vol. 96(5), pages 1850-1858, December.
- Chen, Kaiji & Imrohoroglu, Ayse & Imrohoroglu, Selahattin, 2009. "A quantitative assessment of the decline in the U.S. current account," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1135-1147, November.
- Hirose, Yasuo & Kurozumi, Takushi, 2011.
"Do investment-specific technological changes matter for business fluctuations? Evidence from Japan,"
32944, University Library of Munich, Germany.
- Yasuo Hirose & Takushi Kurozumi, 2012. "Do Investment-Specific Technological Changes Matter For Business Fluctuations? Evidence From Japan," Pacific Economic Review, Wiley Blackwell, vol. 17(2), pages 208-230, 05.
- Yasuo Hirose & Takushi Kurozumi, 2010. "Do Investment-Specific Technological Changes Matter for Business Fluctuations? Evidence from Japan," Bank of Japan Working Paper Series 10-E-4, Bank of Japan.
- Timothy J. Kehoe & Edward C. Prescott, 2002.
"Great Depressions of the Twentieth Century,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 1-18, January.
- Timothy Kehoe & Edward Prescott, 2002. "Data Appendix to Great Depressions of the Twentieth Century," Technical Appendices kehoe02, Review of Economic Dynamics.
- R. Anton Braun & Daisuke Ikeda & Douglas H. Joines, 2009.
"The Saving Rate In Japan: Why It Has Fallen And Why It Will Remain Low,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 291-321, 02.
- Douglas H. Joines & R.Anton Braun & Daisuke Ikeda, 2008. "The saving rate in Japan: Why it has fallen and why it will remain low," CARF F-Series CARF-F-117, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
- R. Anton Braun & Daisuke Ikeda & Douglas H. Joines, 2007. "The Saving Rate in Japan: Why It Has Fallen and Why It Will Remain Low," CIRJE F-Series CIRJE-F-535, CIRJE, Faculty of Economics, University of Tokyo.
- Selahattin Imrohoroglu & Nao Sudo, 2010.
"Productivity and Fiscal Policy in Japan: Short Term Forecasts from the Standard Growth Model,"
IMES Discussion Paper Series
10-E-23, Institute for Monetary and Economic Studies, Bank of Japan.
- Selahattin Imrohoroglu & Nao Sudo, 2011. "Productivity and Fiscal Policy in Japan: Short-Term Forecasts from the Standard Growth Model," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 29, pages 73-106, November.
- Fumio Hayashi & Edward C. Prescott, 2004.
"The 1990s in Japan: a lost decade,"
in: The Economics of an Ageing Population, chapter 2
Edward Elgar Publishing.
- Kaiji Chen & Ayse Imrohoroglu & Selo Imrohoroglu, 2005.
"Japanese Saving Rate,"
- Fumio Hayashi & Edward C. Prescott, 2002.
"Data Appendix to The 1990s in Japan: A Lost Decade,"
hayashi02, Review of Economic Dynamics.
When requesting a correction, please mention this item's handle: RePEc:ime:imedps:11-e-01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kinken)
If references are entirely missing, you can add them using this form.