{
  "title": "Higher Policy Uncertainty Could Be Bad News for Japan’s Economy",
  "publication": "IMF Blog, May 30, 2017",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2017/05/30/higher-policy-uncertainty-could-be-bad-news-for-japans-economy",
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  "summary": "Authors: Elif C. Arbatli, Steven J. Davis, Arata Ito",
  "sections": [
    {
      "heading": "Overview and study design",
      "content": "- Authors: Elif C. Arbatli, Steven J. Davis, Arata Ito\n- Date: May 30, 2017\n- Scope: Analysis of policy uncertainty in Japan from January 1987 onwards.\n- Method: Five indices constructed from frequency of articles containing economy-, policy-, and uncertainty-related terms in four major Japanese newspapers: Yomiuri, Asahi, Mainichi, and Nikkei.\n  - Indices: overall economic policy uncertainty; fiscal policy uncertainty; monetary policy uncertainty; exchange rate policy uncertainty; trade policy uncertainty."
    },
    {
      "heading": "Key findings on timing and drivers of uncertainty",
      "content": "- The overall index rises around contested national elections and major leadership transitions.\n- Peaks in the overall index occurred during:\n  - the Asian financial crisis;\n  - the failure of Lehman Brothers in September 2008;\n  - the resignation of Prime Minister Kan and the US debt-ceiling fight in 2011;\n  - the Brexit referendum in June 2016;\n  - the deferral of a hike in Japan’s consumption tax rate.\n- Global events contribute materially to Japanese policy uncertainty (examples: Brexit referendum, US presidential election)."
    },
    {
      "heading": "Quantitative breakdown of policy-source composition",
      "content": "- Among articles that satisfy the criteria for the overall economic policy uncertainty index:\n  - 57 percent reference fiscal policy matters.\n  - 27 percent reference monetary policy.\n  - 8 percent reference trade policy.\n  - 3 percent reference exchange rate policy.\n- Trade-policy volatility example: a 140 percent jump in the Japan trade policy uncertainty index in 2016 relative to its average in 2014-15.\n- Overall change: the Japan economic policy uncertainty index rose by 56 percent in 2016 compared to its average in 2014-15."
    },
    {
      "heading": "Relationship between policy uncertainty and macroeconomic performance",
      "content": "- Evidence indicates that surprise increases in policy uncertainty foreshadow deteriorations in Japan’s macroeconomic performance.\n- High policy uncertainty is associated with:\n  - discouraged investment;\n  - slowed hiring;\n  - increased use of part-time workers.\n- Mechanisms suggested:\n  - uncertainty acts as an impulse generating fluctuations;\n  - uncertainty amplifies and propagates shocks originating elsewhere;\n  - or both."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Credible plans and clearer communication can reduce policy uncertainty and thereby improve economic performance.\n- Specific policy priorities for Japan:\n  - Establish and communicate credible plans for taxation and spending to restore fiscal credibility (example: postponement of the consumption tax hike initially scheduled for 2015).\n  - Follow through on structural reforms in product and labor markets.\n  - Reforms to boost employment of women and the elderly, given Japan’s aging population and the large share of working-age women not in the labor force.\n  - Clarify the direction of trade policy, in light of diminished US enthusiasm for the Trans-Pacific Partnership.\n  - Develop a concrete and credible plan to tackle Japan’s long-term fiscal sustainability.\n  - Improve Bank of Japan communications: better forward guidance and enhancements to the communications framework.\n\nSource: Higher Policy Uncertainty Could Be Bad News for Japan’s Economy — Elif C. Arbatli, Steven J. Davis, Arata Ito (May 30, 2017).\n\n---\n\n Content in this bundle\n\n- 政策不确定性上升 对日本经济可能是个坏消息\n  - 政策不确定性上升 对日本经济可能是个坏消息 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 政策不确定性上升 对日本经济可能是个坏消息 (PDF){rel=\"external\" type=\"application/pdf\"}\n- 政策の不確実性は日本経済の逆風に;  イリフ・C・アルバトリ、スティーブン・J・デービス、伊藤 新 Imf ブログ 2017年5月30日掲載\n  - 政策の不確実性は日本経済の逆風に;  イリフ・C・アルバトリ、スティーブン・J・デービス、伊藤 新 Imf ブログ 2017年5月30日掲載 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 政策の不確実性は日本経済の逆風に;  イリフ・C・アルバトリ、スティーブン・J・デービス、伊藤 新 Imf ブログ 2017年5月30日掲載 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- initiative\n- working paper\n- https://www.imf.org/wp-content/uploads/2017/05/JAPAN-CHART-2.jpg\n- https://www.imf.org/wp-content/uploads/2017/05/JAPAN-CHART-3.jpg\n\nSource: https://www.imf.org/en/blogs/articles/2017/05/30/higher-policy-uncertainty-could-be-bad-news-for-japans-economy"
    }
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    "Authors: Elif C Arbatli, Steven J Davis, Arata Ito",
    "Published: May 30, 2017",
    "Authors: Elif C. Arbatli, Steven J. Davis, Arata Ito",
    "Date: May 30, 2017",
    "Scope: Analysis of policy uncertainty in Japan from January 1987 onwards.",
    "Method: Five indices constructed from frequency of articles containing economy-, policy-, and uncertainty-related terms in four major Japanese newspapers: Yomiuri, Asahi, Mainichi, and Nikkei.",
    "The overall index rises around contested national elections and major leadership transitions.",
    "Peaks in the overall index occurred during:",
    "Global events contribute materially to Japanese policy uncertainty (examples: Brexit referendum, US presidential election).",
    "Among articles that satisfy the criteria for the overall economic policy uncertainty index:",
    "Trade-policy volatility example: a 140 percent jump in the Japan trade policy uncertainty index in 2016 relative to its average in 2014-15.",
    "Overall change: the Japan economic policy uncertainty index rose by 56 percent in 2016 compared to its average in 2014-15.",
    "Evidence indicates that surprise increases in policy uncertainty foreshadow deteriorations in Japan’s macroeconomic performance.",
    "High policy uncertainty is associated with:",
    "Mechanisms suggested:",
    "Credible plans and clearer communication can reduce policy uncertainty and thereby improve economic performance.",
    "Specific policy priorities for Japan:",
    "**政策不确定性上升 对日本经济可能是个坏消息**",
    "**政策の不確実性は日本経済の逆風に;  イリフ・C・アルバトリ、スティーブン・J・デービス、伊藤 新 Imf ブログ 2017年5月30日掲載**",
    "[initiative](http://www.imf.org/en/News/Articles/2015/09/28/04/53/socar071315a)",
    "[working paper](http://www.imf.org/en/Publications/WP/Issues/2017/05/30/Policy-Uncertainty-in-Japan-44915)",
    "[https://www.imf.org/wp-content/uploads/2017/05/JAPAN-CHART-2.jpg](https://www.imf.org/wp-content/uploads/2017/05/JAPAN-CHART-2.jpg)",
    "[https://www.imf.org/wp-content/uploads/2017/05/JAPAN-CHART-3.jpg](https://www.imf.org/wp-content/uploads/2017/05/JAPAN-CHART-3.jpg)"
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