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Achieving Fiscal Consolidation while Promoting Social Cohesion in Japan

Author

Listed:
  • Randall S. Jones

    (OECD)

  • Kohei Fukawa

    (OECD)

Abstract

With gross government debt of 226% of GDP, Japan’s fiscal situation is in uncharted territory and puts the economy at risk. Japan needs a detailed and credible fiscal consolidation plan, including specific revenue increases and measures to control spending to restore its fiscal sustainability. The major concern on the spending side are social spending pressures in the context of rapid population ageing, making reforms to contain such spending a priority. Much of the consolidation, though, will have to be on the revenue side, primarily through hikes in the consumption tax rate beyond the 10% now planned for 2017. Fiscal consolidation should be accompanied by measures to promote social cohesion through the tax and benefit system and by breaking down labour market dualism. In particular, an earned income tax credit is a priority to assist the working poor.

Suggested Citation

  • Randall S. Jones & Kohei Fukawa, 2015. "Achieving Fiscal Consolidation while Promoting Social Cohesion in Japan," OECD Economics Department Working Papers 1262, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1262-en
    DOI: 10.1787/5jrtpbs9fg0v-en
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    References listed on IDEAS

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    Cited by:

    1. Hyejin Ko, 2020. "Measuring fiscal sustainability in the welfare state: fiscal space as fiscal sustainability," International Economics and Economic Policy, Springer, vol. 17(2), pages 531-554, May.
    2. Randall S. Jones & Kohei Fukawa, 2017. "Ensuring Fiscal Sustainability in Japan in the Context of a Shrinking and Ageing Population," OECD Economics Department Working Papers 1413, OECD Publishing.

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    More about this item

    Keywords

    Abenomics; fiscal policy; healthcare; Japan; social security;
    All these keywords.

    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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