Irresolute Parties? : The Fiscal Stimulus-Structural Reform Policy Dilemma and the Politics of Sectoral Coalitions in Japan

Abstract

Japan was the only advanced industrial democracy to see its public debt skyrocket in the 1990s. The lack of fiscal responsibility is generally attributed to fragmented governments. I argue that fiscal policymaking is not only a function of governmental structures, but also of the preferences and interactions of the major economic sectors. This article pioneers in unveiling the societal foundations of Japanese fiscal policymaking. My main contention is that (1) Japanese policymaking is based on a convergence of preferences among economic sectors; and (2) this policymaking pattern comes at the expense of frequent policy reversals and a burgeoning public debt. I find empirical support for my argument in Japan's fiscal policy reversals in the 1990s.