Japan shies away from fiscal growth strategy
Friday, May 17, 2019
Subject
Secular stagnation in Japan.
Significance
Economists argue that Japan has reached the stage of secular stagnation ahead of other rich countries. However, Japan differs from its contemporaries in important ways.
Impacts
- Interest on government debt is below nominal GDP growth, which favours fiscal stimulus and government deficits.
- Monetary policy that continues to keep interest rates close to zero would support a more aggressive fiscal stance.
- On balance, a planned sales tax increase in October is likely to proceed, with negative consequences for economic growth.