IMF Working Papers

The Impact of Fiscal Consolidation and Structural Reformson Growth in Japan

By Pelin Berkmen

January 1, 2011

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Pelin Berkmen. The Impact of Fiscal Consolidation and Structural Reformson Growth in Japan, (USA: International Monetary Fund, 2011) accessed November 8, 2024
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

With Japan’s public debt reaching historical levels, the need for fiscal consolidation and structural reforms have increased. As fiscal consolidation will require a sustained and large adjustment in the fiscal balance, its growth effect is a concern particularly for the short run. This paper uses the IMF’s Global Integrated Monetary and Fiscal Model to analyze the growth impact of fiscal consolidation and structural reforms. Although fiscal consolidation has short-term costs, the potential long-term benefits are considerable, and reforms that raise potential growth could support consolidation. Simulations show that the external environment also matters but domestic policies should be the priority.

Subject: Consumption taxes, Fiscal consolidation, Fiscal policy, Production, Productivity, Public debt, Structural reforms, Taxes

Keywords: Asia and Pacific, Capital goods, Consumption taxes, Debt ratio, Exchange rate, Expenditure containment, Fiscal consolidation, GDP, Global, Goods producer, Growth prospect, Labor productivity level, Monetary policy, Productivity, Productivity increase, Structural policies, Tax reform, WP

Publication Details

  • Pages:

    21

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2011/013

  • Stock No:

    WPIEA2011013

  • ISBN:

    9781455211913

  • ISSN:

    1018-5941

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