The Domestic and Global Impact of Japan's Policies for Growth

By Nicoletta Batini, Alessandro Rebucci, Papa M N'Diaye

November 1, 2005

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Nicoletta Batini, Alessandro Rebucci, and Papa M N'Diaye. The Domestic and Global Impact of Japan's Policies for Growth, (USA: International Monetary Fund, 2005) accessed November 23, 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

Japan is facing a sizable fiscal imbalance against a backdrop of weak trend growth and growing external imbalances in the world economy. This paper examines the possible impact of fiscal adjustment and productivity-enhancing structural reforms on the Japanese and world economies. Simulation results indicate that these could reduce substantially Japan's fiscal imbalance with only limited spillovers to the rest of the world. Specifically, faster productivity growth would help lower Japan's debt and limit the tendency of fiscal consolidation to increase the external surplus. In fact, very rapid productivity growth could potentially lead to a decline in Japan's external surplus and thereby have a positive effect on global imbalance. The modest extent of the spillovers to the rest of the world reflect the small size of the shocks and the diminished size of Japan in the world economy.

Subject: Balance of payments, Consumption, Current account, Fiscal consolidation, Fiscal policy, National accounts, Production, Productivity, Public debt

Keywords: Asia and Pacific, Consumption, Current account, Fiscal Consolidation, GDP increase, GDP terms, Global, Global External Imbalance, Goods, Government debt-to-GDP ratio, Increase in productivity growth, Interest rate premium, Japan, Japan's current account surplus, Macroeconomic Models, Monetary policy, Productivity, Productivity gain, Productivity Growth, Productivity growth in Japan, Productivity improvement, Productivity-enhancing reform, Trend productivity growth, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/209
Stock No:

WPIEA2005209
ISBN:

9781451862287
ISSN:

1018-5941

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