To date, Japan has failed in every attempt to consolidate its public finances, leaving the balance of government debt moving in an upward direction in terms of GDP. Among several reasons, weak budgetary institutions and insufficient fiscal transparency are the most possible candidates for explaining why Japan fails. This can be also applied to other countries, because some countries are successful in maintaining fiscal discipline while others are not, and thus such differences can be explained by budgetary institutions. Budgetary institutions include many things, but those which could strengthen fiscal governance matter; in particular, fiscal rules, a medium-term fiscal framework, and independent fiscal institutions. Thus, the objective of this paper is to analyze Japan’s fiscal governance by comparison with other OECD countries. This type of assessment cannot exclude arbitrariness, but the analysis provides the evidence that, among advanced countries, fiscal governance is at a low level in Japan. The problem with Japan’s budgetary institutions, in particular, is the lack of a mechanism for the oversight and observance of rules as well as the absence of post hoc evaluation and verification. Reforms of budgetary institutions are urgent to strengthen fiscal governance, but policymakers are always reluctant to implement such reforms. In Japan, efforts have been made for reforms intended to strengthen its political and administrative governance, such as the overhaul of the electoral system and the restructuring of ministries and agencies since the collapse of the bubble economy. It is now possible for a prime minister to exercise political power much more than in the past, but this power is not utilized for strengthening fiscal governance. Ultimately, this is one of Japans greatest political problems.
Hideaki Tanaka (Tue,) studied this question.