Front Matter Page
© 2000 International Monetary Fund
November 2000
IMF Country Report No. 00/144
Japan: Selected Issues
This Selected Issues report on Japan was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with this member country. As such, the views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of Japan or the Executive Board of the IMF.
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Front Matter Page
INTERNATIONAL MONETARY FUND
JAPAN
Selected Issues
Prepared by J. Morsink, R. Ramaswamy, M. Mütleisen, T. Nagaoka (all APD), H. Samiei (EUI) and H. Faruqee (RES)
Approved by the Asia and Pacific Department
October 13, 2000
Contents
I. Population Aging and Its Macroeconomic Implications
A. Introduction
B. Demographic Trends
C. Age-Earnings Profiles in Japan
D. Multimod Simulations
E. Conclusions
Annex 1
Annex II
References
Figures
I.1. Total Fertility Rate (TFR), 1950–2050
I.2. “Birth” Rate and Population Growth, 1960–2150
I.3. Elderly Dependency Ratio, 1960–2150
I.4. Age-Earnings Distributions Japan, 1970–1997
I.5. Multimod Simulation Effects of Population Aging and Decline
I.6. Multimod Simulation Effects of Pension Reform
Tables
I.1. Simulated Effects of Population Aging in Japan
I.2. Simulated Effects of Pension Reform in Japan
II. Sustainable Fiscal Policies for an Aging Population
A. Introduction
B. Social Security and Government Finances
C. A Long-Term Baseline Simulation for Government Finances
D. Policy Analysis
E. Conclusions
Annex
References
Figures
II. 1. Social Security and Welfare Expenditure by Revenue, Scheme and Category, FY1997
II.2. Demographic Projections
II.3. Social Security Operations, 1970–2070
II.4. General Government Operations, 1970–2070
II.5. Macroeconomic Effects of Fiscal Consolidation Strategies
II.6. Macroeconomic Effects of Social Security Reform
Tables
II.1. Old-Age Dependency Ratios
II.2. Public Pension Expenditure, 1995
II.3. Public Health Expenditure, 1995
II.4. General Government Finances, 1999
II.5. Projected Social Security Operations, 1998–2050
II.6. Sensitivity Analysis: Social Security Indicators, 2050
II.7. Finances of Social Security, FY1998
II.8. Major Factors in Modeling Social Security Finances
III. The Yen-Dollar Rate: Have Interventions Mattered?
A. Introduction
B. Foreign Exchange Interventions in Practice
C. Sterilized Versus Unsterilized Interventions
D. Interventions and the Exchange Rate
E. Triggers for Interventions
F. Conclusions
References
Figures
III.1 Foreign Exchange Interventions in the Yen-Dollar Market
III.2. Exchange Rate Interventions
III.3. Exchange Rate Comparisons
Tables
III. 1. Estimated Error Correction Model of Interventions Based on Cointegrating VAR
III.2. Parsimonious Estimated Error Correction Model of Interventions Based on Cointegrating VAR
III.3 Estimated GARCH(1, 1) Model of Interventions
III.4. Probit Model of Triggers for Interventions
IV. Deposit Insurance Reform
A. Introduction
B. Background
C. Design of Limited Deposit Insurance and Bank Resolution Tools
D. Addressing Remaining Bank Weaknesses
References
Tables
IV. 1. G7 Countries: Ratio of Deposit Coverage to Per Capita GDP, 1999
V. Japan: The Unemployment Deflation Puzzle
A. Introduction
B. Measurement Bias in the CPI—Not A Major Cause
C. Prices and Unemployment
D. Downward Rigidity of Wages
E. Pricing Behavior of Companies
F. Household and Business Perceptions About Price Development
G. Conclusions
References
Figures
V.1. Price Developments
V.2. Development of Output Gap, Unemployment, and Core CPI
V.3. Unemployment and Core CPI
V.4. Results of the One-Step Forecast Test
V.5. Development of Nominal Cash Earnings
V.6. Unemployment and Nominal Wages
V.7. Part-Time Employment
V.8. Composition of Unemployment
V.9. Development of Structural Unemployment
V.10. Composition of Shareholders
V.11. Corporate Markups
V.12. Perceived and Actual Development of Prices by Different Sectors
V.13. Gaps Between Corporate Sector’s Perception of Future and Current Prices
Tables
V.I. Selected Indicators
V.2. Estimate of Reduced Form Phillips Curve, 1983Q1–1994Q4