By Max Clarke
Reconstruction efforts in Japan are resulting in spiralling public debt, threatening the country’s position as a major economic player in the region.
Currently at 220% GDP, the wholescale reconstruction programme across the country’s devastated Northeast is resulting in mounting public spend over which Japan appears to have little control, the IMF have warned.
“Japan needs to implement fiscal and structural reforms to strengthen the resilience and growth prospects of its own economy if it is to continue with its existing important, positive role,” said Mahmood Pradhan, IMF mission chief for Japan.
The Japanese economy is showing signs of recovery, but complex shortages in supply chains are putting a strain on manufacturers.
Japan should begin by raising taxes. At 17%, revenues are amongst the lowest in the world. By raising this level, the Asian Nation would be better placed to begin consolidating its other finances.
“Fiscal consolidation would also benefit Japan’s partners by releasing a pool of savings for other countries to borrow and reducing risks from a disruption in the Japanese government bond market,” notes an IMF report.
The report concluded that despite devestation in March and a near decade of subdued economic growth, Japan’s economy remains a force for prosperity and stability on the world stage.
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