Abstract
Miyazawa, Kensuke, and Yamada, Junji—The growth strategy of Abenomics and fiscal consolidation Using a general equilibrium model with an overlapping generation structure, this study examines the impacts of a new Abenomics growth strategy on fiscal consolidation in Japan. Our simulation yielded the following results. (i) It is difficult to achieve the government target of fiscal consolidation by the year 2020 even when assuming that the growth strategy has the desired effects. (ii) Moreover, further economic and fiscal reforms are required from 2030 to 2070 because of accelerated population aging. (iii) However, population policy and an extended retirement age contribute to significant improvements in Japan’s fiscal condition after 2070. (iv) In contrast, the promotion of productivity and the labor force participation rate have a lesser impact on fiscal reconstruction. J. Japanese Int. Economies xxx (xx) (2015) xxx–xxx. Faculty of Economics, Kyushu University, 6-10-1 Hakosaki, Higashi-ku, Fukuoka 812-8581, Japan; Faculty of Economics, University of Toyama, 3190 Gofuku, Toyama 930-0055, Japan
. Concluding remarks
This study examined the impacts of a new Abenomics growth strategy on Japan’s fiscal reconstruction. We calculated the quantity required to redress the fiscal condition using a general equilibrium OLG model that considers multiple generations. The results show that for mid-term fiscal consolidation, it is necessary to change the tax or pension systems drastically. When the consolidation fund is entirely dependent on an increase in the consumption tax rate, to stop increasing the debt-to-GDP ratio after 2020, the rate is estimated to increase to more than 15% in the 2010 decade and more than 20% in the 2030 decade. These results imply that the government mid-term fiscal consolidation target is difficult to achieve, even when assuming that the growth strategy of Abenomics has the desired effect. In contrast, an extension in the retirement age and population maintenance have significant positive impacts on fiscal consolidation especially after the 2070 decade.
