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Financial Crisis and Long-term Stagnation in Japan: Fiscal Consolidation under Deflationary Pressures

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  • Mitsuhiro Fukao

    (Keio University)

Abstract

The Japanese economy faces a number of difficult economic problems to solve; declining working-age population, long-term deflation, monetary policy with zero-interest rate floor, and a large budget deficit. In this paper, we propose a few macro-economic measures to raise taxes without hurting the economic recovery. Specifically, gradual increases in indirect taxes with reductions in payroll tax and corporate income tax will be most effective in improving the Japanese fiscal situations.

Suggested Citation

  • Mitsuhiro Fukao, 2010. "Financial Crisis and Long-term Stagnation in Japan: Fiscal Consolidation under Deflationary Pressures," Keio/Kyoto Joint Global COE Discussion Paper Series 2010-010, Keio/Kyoto Joint Global COE Program.
  • Handle: RePEc:kei:dpaper:2010-010
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    File URL: http://ies.keio.ac.jp/old_project/old/gcoe-econbus/pdf/dp/DP2010-010.pdf
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    References listed on IDEAS

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    1. Mitsuhiro Fukao, 2006. "Financial Strains and the Zero Lower Bound: The Japanese Experience," NBER Chapters,in: Monetary Policy with Very Low Inflation in the Pacific Rim, NBER-EASE, Volume 15, pages 203-232 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Vipin Arora & Rod Tyers & Ying Zhang, 2014. "Reconstructing the Savings Glut: The Global Implications of Asian Excess Saving," CAMA Working Papers 2014-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Rod Tyers & Jenny Corbett, 2012. "Japan's economic slowdown and its global implications: a review of the economic modelling," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 26(2), pages 1-28, November.
    3. Rod Tyers & Ying Zhang, 2011. "Japan's Economic Recovery: Insights from Multi-Region Dynamics," Economics Discussion / Working Papers 11-13, The University of Western Australia, Department of Economics.

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