14 Discussion

Tamim Bayoumi, Guy Meredith, and Bijan Aghevli
Published Date:
June 1998
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Haruhiko Kuroda limited his remarks on the papers to two general points and two technical questions. On the fiscal stance in 1997, the multipliers used by the Ministry of Finance were slightly different from those used in the IMF, being somewhat higher for government spending and lower for taxes, although the differences were not large enough to significantly alter the analysis. With regard to the medium-term consolidation, he noted that the FY 2003 objectives were complemented by other measures. In particular, the current focus of consolidation efforts was on the “Special Reform Term” period of 1998/2000, which implied a front-loaded consolidation plan, and that the additional long-term objective of keeping the sum of taxes and social security contributions below 50 percent of national income was a further source of pressure for long-term reforms. Turning to the paper on fiscal transparency, Kuroda agreed that the FILP was a source for concern, but felt that the paper failed to recognize that the Diet had control over almost all government operations. More specifically, he did not feel that the JNRSC debt was a good example of lack of transparency, as the money provided to the Fund was part of the FILP budget, and hence was provided in an open manner subject to parliamentary control.

In Masaru Yoshitomi’s opinion, the large swings in the fiscal deficit over time largely reflected the influence of large macroeconomic shocks. In the debate between Keynesians and non-Keynesians on the value of fiscal policy over the past few years, he tended to the non-Keynesian view that the expansion of the deficit had not been useful in helping the economy. Moreover, he felt that the prospect of higher future taxes, caused most notably by the aging population, was likely to be a significant impediment to future growth. Hence, reform of the social security system should be a high macroeconomic priority. On the issue of unfunded liabilities, which Yoshitomi felt was important, one would need to look at the balance sheets of all public enterprises for a comprehensive analysis of the topic.

As time was short, the general discussion was limited to Stanley Fischer noting that the Keynesian/non-Keynesian debate referred to by Yoshitomi was also present in the IMF. His own instinct, which was somewhat Keynesian, put him in the minority.

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