The Case for an Independent Fiscal Institution in Japan

IMF Working Papers, August 2, 2016

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In response to the recent financial crisis and the ensuing buildup in public indebtedness, an increasing number of advanced economies have created independent fiscal institutions (IFIs) to improve the quality of public finances and to strengthen the credibility of government policy.
A review of Japan’s fiscal policymaking over the past decades suggests that Japan would greatly benefit from establishing an IFI in line with internationally accepted standards of good practice.
Such an institution could help correct critical weaknesses in policymaking and anchor expectations, especially if introduced as part of a fiscal framework with a medium-term perspective.

Establishing an IFI would improve the quality of public finances and strengthen the credibility of government policy.
Japan’s fiscal policymaking over the past decades exhibits critical weaknesses that an IFI could help correct.
The effectiveness of an IFI would be enhanced if it is introduced as part of a fiscal framework with a medium-term perspective.

Create an independent fiscal institution (IFI) in line with internationally accepted standards of good practice.
Integrate the IFI within a fiscal framework that adopts a medium-term perspective to better anchor expectations and correct policymaking weaknesses.

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.

IMF Working Papers — "The Case for an Independent Fiscal Institution in Japan", George Kopits, August 2, 2016.

The Case for an Independent Fiscal Institution in Japan
- The Case for an Independent Fiscal Institution in Japan (Markdown version)
- The Case for an Independent Fiscal Institution in Japan (PDF)