Challenges for Japan's Fiscal Consolidation *

This paper describes Japan’s past and current fiscal situations and discusses necessary actions for future fiscal consolidation. Since 1990s, the government expenditure has steadily increased due to growing social security benefits along with aging society, but the level of government revenue has little changed. Despite the increase in government debt, actions for fiscal consolidation have been delayed due to lax monetary condition and lack of continuous commitment with public support. Since political support for fiscal policies are asymmetric between “austerity” and “expansion’, it is vital for achieving fiscal consolidation to set up legislative fiscal rules with concrete targets and tractable measures, in addition to basic Public Finance Law.