Achieving Fiscal Balance in Japan*

Abstract

Japan is aging and has the highest government debt‐to‐output ratio among advanced economies. In this article, we build a micro data‐based, large‐scale overlapping generations model for Japan in which individuals differ in age, gender, employment type, income, and asset holdings, and incorporate the Japanese pension rules. Using existing pension law, current fiscal policy, and medium variants of demographic projections, we produce future paths for government expenditures and tax revenues, with implications for government debt and the public pension fund. Additional pension reform, a higher consumption tax, and higher female labor force participation help achieve fiscal stability.

Is There a Demand for Reverse Mortgages in China? Evidence from Two Online Surveys

“…Our paper is also connected to a large body of literature that quanti…es the …scal costs of population aging in advanced economies and studies the implications of pension and tax policy reforms designed for the mitigation of these …scal costs. Various reforms have been proposed to reduce the cost of the social security programs or raise revenue to fund them (e.g., see Kotliko¤ et al (2007), Krueger and Ludwig (2007), Kitao (2014), Nishiyama (2015) and McGrattan and Prescott (2017) for the US; Braun and Joines (2015), Kitao (2015) and Imrohoroglu et al (2016) for Japan; and Kudrna et al (2019) for Australia). McGrattan and Prescott (2017) in particular consider several reform proposals to switch from a pay-as-you-go (PAYG) social security system that relies on high payroll taxes to a fully-funded, saving-for-retirement system in the US.…”

Comparing budget repair measures for a small open economy with growing debt

“…The government is assumed to have three fiscal measures to finance each of the two consolidation plans: (i) the income tax rates, (ii) the consumption tax rate and (iii) transfer payments. 17 The adjustments in income or consumption taxes or transfer payments are made to balance the government budget constraint in (6) from year 2015 onwards. While it is straightforward to implement the consumption tax adjustments via temporary increases in the effective consumption tax rate, τ c t , additional assumptions need to be made for the other two measures.…”

“…Hence, the change in labour supply must be matched by the change in the capital stock in the long run. The observed difference between the long run effects on labour and capital inTable 4is due to the changes in the effective tax rate on firm's profits (that are to match observed company tax revenues in % of GDP) during the calibration period of 2009-14, which alter the capital labour ratio in the long run 17. We also consider two alternative tax measures to repair the government budget: (i) temporary levy on labour income and (ii) temporary levy on total assets income.…”

Policy Uncertainty and Saving Attitude: Evidence from a Survey on Consumers

“…A large number of studies have estimated that the consumption tax (VAT) rate, which is currently at 8%, must be increased to the range of 20–60% in order to ensure sustainability of the government budget (e.g., Braun and Joines ; Hansen and İmrohoroğlu ; Hoshi and Ito ; Kitao ; Miyazawa and Yamada ). Other studies have indicated that measures like drastically cutting down social security benefits and increasing social security contributions, taken either independently or together, are inevitable (e.g., İmrohoroğlu, Kitao, and Yamada ; Kitao ).…”

“…measures like drastically cutting down social security benefits and increasing social security contributions, taken either independently or together, are inevitable (e.g.,İmrohoroglu, Kitao, and Yamada 2016;Kitao 2017).…”