The IMF Country Reports Series covers economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with officials of the country, is published at the option of the member.
Japan's position is one of the largest and richest economies in the world. Tokyo as a financial marketplace is not a major intermediator of global capital flows. The current macroeconomic environment is conducive to spillovers being larger than captured by the empirical analysis. Apart from heading off tail risks, fiscal consolidation in Japan would have medium to long-term benefits for its partner countries. Exchange rate-related spillovers on foreign financial markets are found to be small and depend partly on policy developments abroad.