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Restoring Japan's Fiscal Sustainability


  • Randall S. Jones


  • Satoshi Urasawa



With gross government debt surpassing 200% of GDP, Japan’s fiscal situation is in uncharted territory. In addition to robust nominal GDP growth, correcting two decades of budget deficits requires a large and sustained fiscal consolidation based on a detailed and credible multi-year plan that includes measures to control spending and raise revenue. On the spending side, reforms to contain ageing-related outlays are the priority, while the consumption tax should be the main source of additional revenue, given that its impact on economic activity is less negative than other taxes. The plan should target a primary budget surplus large enough to stabilise the public debt ratio by 2020. The fiscal policy framework should be improved to help reinforce confidence in Japan's fiscal position and prevent a run-up in interest rates. Higher consumption taxes should be accompanied by well-targeted social spending, including the introduction of an earned income tax credit, to prevent a rise in inequality and poverty. This Working Paper relates to the 2013 OECD Economic Survey of Japan ( Rétablir la viabilité des finances publiques au Japon Avec une dette publique brute dépassant 200 % du PIB, les finances publiques japonaises sont en territoire inconnu. Outre une forte croissance du PIB nominal, il faudra, pour remédier à deux décennies de déficit budgétaire, un assainissement important et soutenu des finances publiques dans le cadre d’un plan pluriannuel détaillé et crédible qui comprenne des mesures visant à limiter les dépenses et accroître les recettes. S’agissant des dépenses, la priorité est donnée aux réformes destinées à contenir les dépenses liées au vieillissement, et l’impôt sur la consommation devra constituer la principale source de recettes supplémentaires puisqu’il a, sur l’activité économique, une incidence moins négative que les autres impôts. Le plan devra viser un excédent budgétaire primaire suffisant pour stabiliser le ratio d’endettement d’ici 2020. Le cadre de la politique budgétaire devra être amélioré pour aider à renforcer la confiance dans les finances publiques japonais et éviter une remontée rapide des taux d’intérêt. La hausse de l’impôt sur la consommation devra s’accompagner de dépenses sociales bien ciblées, notamment d’une réduction de la fiscalité dur travail, pour empêcher une aggravation des inégalités et de la pauvreté. Ce Document de travail a trait à l’Étude économique de l’OCDE du Japon, 2013 (

Suggested Citation

  • Randall S. Jones & Satoshi Urasawa, 2013. "Restoring Japan's Fiscal Sustainability," OECD Economics Department Working Papers 1050, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1050-en

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    References listed on IDEAS

    1. Łukasz Rawdanowicz & Eckhard Wurzel & Ane Kathrine Christensen, 2013. "The Equity Implications of Fiscal Consolidation," OECD Economics Department Working Papers 1013, OECD Publishing.
    2. Balázs Égert, 2015. "Public debt, economic growth and nonlinear effects: Myth or reality?," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 226-238.
    3. Takeo Hoshi & Takatoshi Ito, 2012. "Defying Gravity: How Long Will Japanese Government Bond Prices Remain High?," NBER Working Papers 18287, National Bureau of Economic Research, Inc.
    4. Isabell Koske & Jean-Marc Fournier & Isabelle Wanner, 2012. "Less Income Inequality and More Growth – Are They Compatible? Part 2. The Distribution of Labour Income," OECD Economics Department Working Papers 925, OECD Publishing.
    5. Kenichiro Kashiwase & Masahiro Nozaki & Kiichi Tokuoka, 2012. "Pension Reforms in Japan," IMF Working Papers 12/285, International Monetary Fund.
    6. Jens Matthias Arnold & Bert Brys & Christopher Heady & Åsa Johansson & Cyrille Schwellnus & Laura Vartia, 2011. "Tax Policy for Economic Recovery and Growth," Economic Journal, Royal Economic Society, vol. 121(550), pages 59-80, February.
    7. Margit Molnar, 2012. "Fiscal Consolidation: Part 5. What Factors Determine the Success of Consolidation Efforts?," OECD Economics Department Working Papers 936, OECD Publishing.
    8. Douglas Sutherland & Peter Hoeller & Rossana Merola, 2012. "Fiscal Consolidation: Part 1. How Much is Needed and How to Reduce Debt to a Prudent Level?," OECD Economics Department Working Papers 932, OECD Publishing.
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    Cited by:

    1. repec:eee:joecag:v:8:y:2016:i:c:p:85-93 is not listed on IDEAS
    2. Brieuc Monfort, 2015. "Can Increased Public Expenditure Efficiency Contribute to the Consolidation of Public Finances in Japan?," Working Papers halshs-01548620, HAL.

    More about this item


    Abenomics; Abenomics; assainissement budgétaire; conseils budgétaires indépendants; consumption tax; debt dynamics; dette publique; dynamique de la dette; dépenses de reconstruction; fiscal consolidation; fiscal management strategy; fiscal policy; fiscal sustainability; impôts sur la consommation; independent fiscal councils; inequality; inégalité; Japanese economy; pauvreté; pensions; politique budgétaire; poverty; public debt; reconstruction spending; social security; stratégie de gestion budgétaire; sécurité sociale; viabilité budgétaire; économie japonaise;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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