Published papers

We construct quarterly series of the revenues, expenditures, and debt outstanding for Japan from 1980 to 2010, and analyze the sustainability of the fiscal policy. We pursue three approaches to examine the sustainability. First, we calculate the minimum tax rate that stabilizes the debt to GDP ratio given the future government expenditures. Using 2010 as the base year, we find that the government revenue to GDP ratio must rise permanently to 40–47% (from the current 33%) to stabilize the debt to GDP ratio. Second, we estimate the response of the primary surplus when the debt to GDP ratio increases. We allow the relationship to fluctuate between two “regimes” using a Markov switching model. In both regimes, the primary surplus to GDP ratio fails to respond positively to debt, which suggests the process is explosive. Finally, we estimate a fiscal policy function and a monetary policy function with Markov switching. We find that the fiscal policy is "active" (the tax revenues do not rise when the debt increases) and the monetary policy is "passive" (the interest rate does not react to the inflation rate sufficiently) in both regimes. These results suggest that the current fiscal situation for the Japanese government is not sustainable.

This paper analyzes the Administrative Cash Flow Statements, which are used as one of indicators to ascertain financial conditions of local governments inthe FILP (Fiscal Investment and Loan Program) of the Ministry of Finance, and to analyze the relationship among the various indicator ratios used to assess the soundness of local finances in accordance with the Law Relating to the Financial Soundness of Local Governments. The Administrative Cash Flow Statements were divided into sections such as administrative current revenue and expenditure, investment revenue and expenditure, and financial revenue and expenditure by rearranged existing data on settlement reports in a meaningful way to recognize the financial conditions of local governments. The results in this paper suggest that the ratio of administrative current balance to revenue had a significantly positive correlation with primary balance, an indicator that is closely related to fiscal sustainability, and it is necessary to monitor the number of years required to repay debts independently from other indicators. From panel analyses on municipalities for 2001 to 2008 an increase in tax revenues and a cut of personnel costs contributed to improved administrative current balance to revenue ratio, and in particular, such a ratio improved at times of excessive tax rates and during municipal mergers. It also showed that an increase in tax revenues and a cut of personnel costs were important in order to improve primary balance of local governments. The analyses in this article imply that the Administrative Cash Flow Statements, which are used to grasp financial conditions in the FILP, are useful indicators in academic researches, as well as the ratios in accordance with the Law Relating to the Financial Soundness of Local Governments, and we hope that the Administrative Cash Flow Statements will be utilized further in future.

This essay investigates poverty traps related to Local Allocation Tax (LAT) grants in Japan. LAT grants, which are transfers of funds from the central government to local governments, make efforts for enhancing regional economic growth, due to the calculation of the LAT grants. Using a simple dynamic model, we show that LAT grants lower regional income and are a disincentive to localities to increase their estimated tax revenue. Using panel Granger (non-)causality tests, we find empirical support for asserting that there are poverty traps due to the LAT grants in Japan.

In this paper, we examine a micro-simulation of income taxation, using the household income data of 2008 obtained in the first survey of the Japanese Household Panel Survey (JHPS) performed by the Keio University Joint Research Center for Panel Studies in January 2009. We also analyze the policy effect of the child-care benefit introduced by the Hatoyama Administration. The result of this paper are first, it was verified that there is progressivity and high rate of income deduction in the present income tax system, and that tax base is becoming smaller, due to income deduction in current income tax system. Second, our micro-simulation demonstrates that provision of child-care benefit produces nets benefits for low-to middle-income earners.