|
Japan Monetary and Fiscal Policy
Monetary policy pertains to the regulation,
availability, and
cost of credit, while fiscal policy deals with government
expenditures, taxes, and debt. Through management of these
areas,
the Ministry of Finance regulated the allocation of
resources in
the economy, affected the distribution of income and
wealth among
the citizenry, stabilized the level of economic
activities, and
promoted economic growth and welfare.
The Ministry of Finance played an important role in
Japan's
postwar economic growth. It advocated a "growth first"
approach,
with a high proportion of government spending going to
capital
accumulation, and minimum government spending overall,
which kept
both taxes and deficit spending down, making more money
available
for private investment. Most Japanese put money into
savings
accounts (see
table 12, Appendix).
In the postwar period, the government's fiscal policy
centers
on the formulation of the national budget, which is the
responsibility of the Ministry of Finance. The ministry's
Budget
Bureau prepares expenditure budgets for each fiscal year
(FY--see Glossary)
based on the requests from government ministries
and
affiliated agencies. The ministry's Tax Bureau is
responsible for
adjusting the tax schedules and estimating revenues. The
ministry
also issues government bonds, controls government
borrowing, and
administers the Fiscal Investment and Loan Program, which
is
sometimes referred to as the "second budget."
Three types of budgets are prepared for review by the
National
Diet each year
(see The Legislature
, ch. 6). The general
account
budget includes most of the basic expenditures for current
government operations. Special account budgets, of which
there are
about forty, are designed for special government programs
or
institutions where close accounting of revenues and
expenditures is
essential: for public enterprises, state pension funds,
and public
works projects financed from special taxes. Finally, there
are the
budgets for the major affiliated agencies, including
public service
corporations, loan and finance institutions, and the
special public
banks (see
table 13, Appendix). Although these budgets are
usually
approved before the start of each fiscal year, they are
usually
revised with supplemental budgets in the fall. Local
jurisdiction
budgets depend heavily on transfers from the central
government.
Government fixed investments in infrastructure and
loans to
public and private enterprises are about 15 percent of
GNP. Loans
from the Fiscal Investment and Loan Program, which are
outside the
general budget and funded primarily from postal savings,
represent
more than 20 percent of the general account budget, but
their total
effect on economic investment is not completely accounted
for in
the national income statistics. Government spending,
representing
about 15 percent of GNP in 1991, was low compared with
that in
other developed economies. Taxes provided 84.7 percent of
revenues
in 1993. Income taxes are graduated and progressive. The
principal
structural feature of the tax system is the tremendous
elasticity
of the individual income tax. Because inheritance and
property
taxes are low, there is a slowly increasing concentration
of wealth
in the upper tax brackets. In 1989 the government
introduced a
major tax reform, including a 3 percent consumer tax.
Data as of January 1994
|
