## The Fiscal Stance in Japan: A Model-based Analysis

_IMF Working Papers, August 19, 2022_

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## Bibliographic details
- Authors: Jean-Marc Fournier, Takuma Hisanaga, Anh D. M. Nguyen
- Published: August 19, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400217135.001

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### Authors and Publication
- Jean-Marc Fournier, Takuma Hisanaga, Anh D. M. Nguyen
- August 19, 2022
- IMF Working Papers, Working Paper No. 2022/164; Issue: 164; Volume: 2022; Pages: 22
- DOI: https://doi.org/10.5089/9798400217135.001
- Stock No: WPIEA2022164; ISBN: 9798400217135; ISSN: 1018-5941

### Abstract and Core Assessment
- The paper assesses Japan’s fiscal stance in the past and the future using a stochastic structural model called the Buffer-Stock Model of the Government.
- Retrospective conclusion: fiscal stance in the 1990s and the early 2000s was overall looser than the model recommendations.
- Forward-looking recommendation: the model advises near-term fiscal policy to be supportive to narrow the output gap and minimize hysteresis, while recommending a fiscal consolidation over the medium-term at a gradual pace.

### Key Findings (Retrospective)
- Fiscal stance in the 1990s and the early 2000s was overall looser than model recommendations.

### Policy Recommendations (Forward-looking)
- Near-term: adopt a supportive fiscal policy with the objective of narrowing the output gap and minimizing hysteresis.
- Medium-term: implement a gradual fiscal consolidation.

### Model and Analytical Focus
- Model used: Buffer-Stock Model of the Government (stochastic structural model).
- Analytical emphasis: fiscal stance assessment across historical episodes and future policy paths, balancing cycle stabilization and debt concerns.

### Subjects and Keywords
- Subject: Fiscal consolidation, Fiscal policy, Fiscal stance, Output gap, Production, Public debt
- Keywords: B. sensitivity analysis, baseline calibration, baseline model advice, cycle stabilization, debt buffer, debt level, Fiscal consolidation, fiscal policy path, Fiscal stance, Global, government debt, government deficit, interest rate-growth differential, Japan's fiscal policy, near-term fiscal policy, Output gap, sustainability concern, utility function

*Source: The Fiscal Stance in Japan: A Model-based Analysis, IMF Working Papers 2022, 164 (2022).*

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