The Origins of Japan's Fiscal Crisis
This chapter traces the origins of Japan's fiscal crisis that emerged in the mid-1970s, and describes the symptoms and characteristics that persisted for the rest of the 20th century. The fiscal problems confronting the Ministry of Finance during that period include fast-rising expenditure, inadequate revenue growth, burgeoning fiscal deficits, heavy and continuous government borrowing, and accumulating debt. As the costs of servicing that debt absorbed an increasing proportion of total spending, the amount available to finance both mandatory and discretionary expenditures, themselves subjected to the pressure of the new ‘welfare politics’ inaugurated in 1973, was progressively squeezed. To those difficulties were added the imminent prospect of an increasing ratio of the elderly to the working population, imposing an additional burden of costs for expanded and new social security, pensions, health, and welfare programmes; and fewer wage-earners and tax-payers to generate additional revenues.
Keywords: fiscal crisis, expenditures, revenues, fiscal deficits, government borrowing, debt, social security, pensions
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