Fading Ricardian Equivalence in Ageing Japan

Author/Editor:

Ikuo Saito

Publication Date:

September 27, 2016

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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 seems to be turning less Ricardian, a trend set to continue. First, the discount wedge seems to have risen, suggesting that consumers have become more myopic. Second, some evidence points to the possibility that an increasing number of households are liquidity constrained. If these developments continue, the impact of fiscal policy on the economy will gradually rise. While this will facilitate using fiscal policy to manage the economic cycle, it also calls for starting fiscal consolidation soon and in a gradual and steady manner, given the unsustainable public debt and the likely increasing challenges in funding the government's rising debt domestically.

Series:

Working Paper No. 2016/194

Subject:

Aging Asset and liability management Consumption taxes Fiscal policy Liquidity Population and demographics Public debt Taxes

English

Publication Date:

September 27, 2016

ISBN/ISSN:

9781475541649/1018-5941

Stock No:

WPIEA2016194

Pages:

18

Please address any questions about this title to publications@imf.org