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Japan launches national fiscal strategy to tackle huge national debt

Tuesday 13 July 2010 - by Andrew Naylor

Despite the seriousness of the problem Japan faces, it is not all doom and gloom. Japan is an innovative, developed economy and the International Monetary Fund is relatively optimistic about its economic situation.

At the conclusion of an Article IV consultation discussion with Japan, the IMF delegation said: “Japan’s recovery is gaining strength. Decisive policy action and strong external demand are driving the recovery, with GDP expected to grow by around 2 per cent in both 2010 and 2011, and inflation to turn positive in late 2011.”

The IMF delegation did, however, set out its own roadmap for fiscal reform.
It said: “Fiscal adjustment should start in 2011, beginning with a gradual increase in the consumption tax, to take advantage of the cyclical recovery. Stabilising the public debt ratio and placing it on a downward path will also require measures to contain the growth in spending. Adopting a fiscal rule based on a primary balance target and debt limit would strengthen the commitment to fiscal consolidation.”



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