The Importance of Fiscal Consolidation for Sustained Economic Recovery in Japan

Fiscally, Japan is in critical condition, which means future sustainable economic growth is at great risk. To rectify this situation, the Japanese government must shift its policy toward fiscal consolidation. Japan can learn many lessons from European countries and the United States, which achieved both fiscal consolidation and economic growth in the 1990s. Japan needs better management of the budget process, including the introduction of achievable fiscal targets and a medium-term planning framework for the budget. Such reforms should be implemented as soon as possible.