The Domestic and Global Impact of Japan's Policies for Growth

Author/Editor: Batini, Nicoletta ; Rebucci, Alessandro ; N'Diaye, Papa M'B. P.
Publication Date: November 01, 2005
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: Japan is facing a sizable fiscal imbalance against a backdrop of weak trend growth and growing external imbalances in the world economy. This paper examines the possible impact of fiscal adjustment and productivity-enhancing structural reforms on the Japanese and world economies. Simulation results indicate that these could reduce substantially Japan's fiscal imbalance with only limited spillovers to the rest of the world. Specifically, faster productivity growth would help lower Japan's debt and limit the tendency of fiscal consolidation to increase the external surplus. In fact, very rapid productivity growth could potentially lead to a decline in Japan's external surplus and thereby have a positive effect on global imbalance. The modest extent of the spillovers to the rest of the world reflect the small size of the shocks and the diminished size of Japan in the world economy.
Series: Working Paper No. 05/209
Subject(s): Economic Growth | Japan | Economic policy | External debt | Fiscal management | Productivity | Economic models

Author's Keyword(s): Japan | gloabl External Imbalance | Fiscal Consolidation | Productivity Growth | Macroeconomic Models
Publication Date: November 01, 2005
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2005209 Pages: 22
US$15.00 (Academic Rate:
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