Japan's Medium: and Long-Term Fiscal Challenges

Author/Editor:

K. Okamura

Publication Date:

October 1, 1996

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:

This paper assesses the sustainability of Japan’s fiscal position. The simulations indicate that, even if the government’s pension reform plan is fully implemented, the initial budget imbalance, combined with pressures from population aging, would lead to explosive increases in government deficits and debt. Present-value calculations point to a fiscal “gap” of about 4 percent of GDP, indicating the combination of tax increases and/or spending cuts that would be required to generate a sustainable long-run fiscal position. Finally, the paper presents an illustrative package of tax and spending measures that could be implemented to close this gap.

Series:

Working Paper No. 1996/113

Subject:

Aging Current spending Expenditure Labor Pension reform Pensions Population and demographics Public investment spending

English

Publication Date:

October 1, 1996

ISBN/ISSN:

9781451853674/1018-5941

Stock No:

WPIEA1131996

Pages:

30

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