OPTIMAL FISCAL OPERATION

Abstract

Japanese economy which had enjoyed high growth for about twenty years greatly changed its growth pattern with the occurence of the first oil crisis, pointing toward low economic growth. With such conversion of economic growth pattern, the national public finance as it should be was forced into a great reform. Especially, contradiction of annual revenue and expenditure between increase in expenditure centered in natural increase due to the fiscal system established in the latter half of the period of high economic growth and decrease or slump in revenue due to slower growth led the fiscal operation to extremely difficult situation. The fiscal policy in fiscal 1975-fiscal 1990 was in the distress concerning adjustment of these two factors. This paper considers measures to solve today's fiscal issues by looking back on this period. When considering the fiscal policy fiscal 1975-fiscal 1990, we can classify this period into four phases by types of the fiscal policy, which are called respectively Phase I (fiscal 1975-fiscal 1979), Phase II (fiscal 1980-fiscal 1982), Phase III (fiscal 1983-fiscal 1985) and Phase IV (fiscal 1986-fiscal 1990). In Phase I, annual expenditure grew larger due to influence of inflation caused by the oil crisis in addition to increased expenditure owing to maturity of the fiscal system toward the welfare state which was established in the earlier half of 1970's, while tax revenue