The Crisis that Wasn’t: How Japan Has Avoided a Bond Market Panic

Greenan, Mark T.; Weinstein, David E.

This paper explores the history of Japanese fiscal policy over the past two decades with the aim of better understanding where previous forecasts have erred. As such, Japan provides an important case study of how a country facing intense fiscal pressures can avoid a hyperinflation or financial panic. We find that there were three key forces that likely improved Japan’s fiscal situation relative to more pessimistic predictions. First, the Japanese government has shown remarkable ability to hold down per capita expenditures on social pensions and healthcare. Second, the Japanese government has been able to raise taxes substantially. Third, the remarkable monetary policy pursued by the Bank of Japan has resulted in a dramatic decline in the amount of government bonds held by the private sector.

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More About This Work

Academic Units
Center on Japanese Economy and Business
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Center on Japanese Economy and Business Working Papers, 361
Published Here
November 6, 2017