NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Deteriorating Fiscal Situation and an Aging Population

Robert Dekle

NBER Working Paper No. 9367*
Issued in December 2002
NBER Program(s):   EFG    PE

Japan's deteriorating fiscal situation has attracted international attention. I assess what current Japanese government policies mean for the future of public debt and the economy in general, given the inevitable aging of the population. I review how Japan got into this current fiscal mess, and then perform an analysis of some debt dynamics. With unchanged fiscal policies, Japan's public debt will rise to between 260% and 380% of GDP in 2030, and to between 700% and 1300% in 2040 -- clearly unsustainable levels. For the debt to be sustainable, significant increases in taxes, or cuts in government spending are necessary.

*Published: This paper was subsequently published as The Deteriorating Fiscal Situation and an Aging Population, Robert Dekle, in NBER book Structural Impediments to Growth in Japan (2003)

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