{
  "title": "Intergenerational Implications of Fiscal Consolidation in Japan",
  "publication": "IMF Working Papers, August 1, 2012",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/intergenerational-implications-of-fiscal-consolidation-in-japan-26141",
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  "summary": "In Japan, intergenerational inequality in lifetime resources is substantial, with a heavier fiscal burden on the young than the old. Moreover, given the need for fiscal consolidation, the inequality is even worse than existing policy would suggest.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- In Japan, intergenerational inequality in lifetime resources is substantial, with a heavier fiscal burden on the young than the old.\n- Given the need for fiscal consolidation, intergenerational inequality is worse than existing policy would suggest.\n- Lack of fiscal consolidation would eventually increase interest rates, reduce output, and hit young generations harder.\n- Simulations using an overlapping generations model indicate that fiscal consolidation packages combining social security spending reforms and revenue measures are desirable from the perspective of intergenerational fairness.\n- Delaying fiscal consolidation could be costly and worsen intergenerational resource inequality."
    },
    {
      "heading": "Key findings",
      "content": "- Intergenerational inequality: fiscal burden is shifted more heavily onto younger cohorts compared with older cohorts.\n- Fiscal consolidation composition: including both social security spending reforms and revenue measures improves intergenerational fairness.\n- Timing: postponing fiscal consolidation increases costs and exacerbates intergenerational inequality.\n- Macroeconomic consequence of inaction: higher interest rates and lower output would disproportionately affect young generations."
    },
    {
      "heading": "Simulations and methodological notes",
      "content": "- Model used: overlapping generations (OLG) model / OLG simulation.\n- Metrics referenced: lifetime resources, net burden, present discounted value, pension replacement ratio.\n- Policy instruments analyzed: social security (pension) spending reforms, VAT increase and other revenue measures."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Combine social security spending reforms with revenue measures in fiscal consolidation packages to improve intergenerational fairness.\n- Avoid delaying fiscal consolidation because delay can be costly and worsen intergenerational resource inequality.\n- Consider the long-run macroeconomic effects of failing to consolidate (higher interest rates and lower output) which would harm younger cohorts.\n\n---\n\n Content in this bundle\n\n- wp12197\n  - wp12197 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp12197 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/intergenerational-implications-of-fiscal-consolidation-in-japan-26141"
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    "Authors: Kiichi Tokuoka",
    "Published: August 1, 2012",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475505474.001",
    "In Japan, intergenerational inequality in lifetime resources is substantial, with a heavier fiscal burden on the young than the old.",
    "Given the need for fiscal consolidation, intergenerational inequality is worse than existing policy would suggest.",
    "Lack of fiscal consolidation would eventually increase interest rates, reduce output, and hit young generations harder.",
    "Simulations using an overlapping generations model indicate that fiscal consolidation packages combining social security spending reforms and revenue measures are desirable from the perspective of intergenerational fairness.",
    "Delaying fiscal consolidation could be costly and worsen intergenerational resource inequality.",
    "Intergenerational inequality: fiscal burden is shifted more heavily onto younger cohorts compared with older cohorts.",
    "Fiscal consolidation composition: including both social security spending reforms and revenue measures improves intergenerational fairness.",
    "Timing: postponing fiscal consolidation increases costs and exacerbates intergenerational inequality.",
    "Macroeconomic consequence of inaction: higher interest rates and lower output would disproportionately affect young generations.",
    "Model used: overlapping generations (OLG) model / OLG simulation.",
    "Metrics referenced: lifetime resources, net burden, present discounted value, pension replacement ratio.",
    "Policy instruments analyzed: social security (pension) spending reforms, VAT increase and other revenue measures.",
    "Combine social security spending reforms with revenue measures in fiscal consolidation packages to improve intergenerational fairness.",
    "Avoid delaying fiscal consolidation because delay can be costly and worsen intergenerational resource inequality.",
    "Consider the long-run macroeconomic effects of failing to consolidate (higher interest rates and lower output) which would harm younger cohorts.",
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