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Online Notes
From Miracle to
Cautionary Tale:
The Politics of
Public Spending
in Japan
Requires:
Adobe Reader
Japan's meteoric
economic rise
from the end of
World War II
through the
1980s and then
its rapid
descent into
economic
stagnation is
one of the
greatest
reversals of
economic
fortunes among
the
industrialized
democracies.
Japanšs public
finances
followed a
similar arc,
with Japan, a
former model of
fiscal
discipline and
restrained
spending,
becoming
virtually
synonymous with
wasteful pork
barrel spending.
Yet this widely
accepted view of
Japan ignores a
simple but
critical fact:
Japanese
spending remains
low despite
ballooning
budget deficits.
This
presentation
explains this
puzzle by
focusing on a
poorly
understood yet
massive
government-run
financial system
called the
Fiscal
Investment Loan
Program (FILP).
FILP, not only
provided the
ruling party a
second shadow
budget, it
allowed the
party to build a
powerful and
long lasting
political
coalition that
helped it stay
in power.
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