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The Deteriorating Fiscal Situation and an Aging Population

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  • Robert Dekle

Abstract

Japan's deteriorating fiscal situation has attracted international attention. I assess what current Japanese government policies mean for the future of public debt and the economy in general, given the inevitable aging of the population. I review how Japan got into this current fiscal mess, and then perform an analysis of some debt dynamics. With unchanged fiscal policies, Japan's public debt will rise to between 260% and 380% of GDP in 2030, and to between 700% and 1300% in 2040 -- clearly unsustainable levels. For the debt to be sustainable, significant increases in taxes, or cuts in government spending are necessary.

Suggested Citation

  • Robert Dekle, 2002. "The Deteriorating Fiscal Situation and an Aging Population," NBER Working Papers 9367, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9367
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    References listed on IDEAS

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    1. Ono, Hiroshi & Rebick, Marcus, 2002. "Impediments to the Productive Employment of Labor in Japan," SSE/EFI Working Paper Series in Economics and Finance 500, Stockholm School of Economics.
    2. Takero Doi & Takeo Hoshi, 2003. "Paying for the FILP," NBER Chapters, in: Structural Impediments to Growth in Japan, pages 37-70, National Bureau of Economic Research, Inc.
    3. David M. Cutler & James M. Poterba & Louise M. Sheiner & Lawrence H. Summers, 1990. "An Aging Society: Opportunity or Challenge?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 1-74.
    4. Mitsuhiro Fukao, 2003. "Financial Sector Profitability and Double-Gearing," NBER Chapters, in: Structural Impediments to Growth in Japan, pages 9-36, National Bureau of Economic Research, Inc.
    5. Ishi, Hiromitsu, 2000. "Making Fiscal Policy in Japan: Economic Effects and Institutional Settings," OUP Catalogue, Oxford University Press, number 9780199240715.
    6. Toshihiro Ihori & Toru Nakazato & Masumi Kawade, 2003. "Japan's Fiscal Policies in the 1990s," The World Economy, Wiley Blackwell, vol. 26(3), pages 325-338, March.
    7. repec:fth:harver:1490 is not listed on IDEAS
    8. Hiroko Ishii & Erika Wada, 1998. "Local Government Spending: Solving the Mystery of Japanese Fiscal Packages," Working Paper Series WP98-5, Peterson Institute for International Economics.
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    Cited by:

    1. Alan J. Auerbach & Maurice Obstfeld, 2005. "The Case for Open-Market Purchases in a Liquidity Trap," American Economic Review, American Economic Association, vol. 95(1), pages 110-137, March.
    2. Ogawa, Kazuo & Imai, Kentaro, 2014. "Why do commercial banks hold government bonds? The case of Japan," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 201-216.
    3. Kazuo Ogawa & Elmer Sterken & Ichiro Tokutsu, 2016. "Public Debt, Economic Growth and the Real Interest Rate:A Panel VAR Approach to EU and OECD Countries," ISER Discussion Paper 0955, Institute of Social and Economic Research, Osaka University.

    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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