Project Paper - Session 3
"The Role of Public Awareness in Fiscal Reform" (Abstract of Discussion Paper 04-J-010)
NAKABAYASHI Mieko (RIETI Fellow)
The causes of Japan's fiscal deficits are structural in nature rather than cyclical. Not only has Japan been logging the worst records in fiscal deficits among industrialized countries, but it is also confronted with major challenges such as the problem of an aging population. The presence of fiscal deficits, which has been destabilizing the economy, is also beginning to cause fiscal rigidity that undermines efficient resource allocation to important policy measures. Yet despite being beset from all sides, Japan needs to push forward with fiscal reform. The government needs to consider the best way to spend its limited resources, namely, taxpayers' money. At the same time, however, it cannot avoid the ordeal of raising taxes while trimming down on public services. The fate of fiscal reform carried out under such conditions hinges on how the people � as taxpayers and creditors � understand the situation and what choices they make regarding the future. Japan's decision-making process for fiscal policy has been extremely opaque in the eyes of the general public and it remains unclear where responsibility lies. Those with fiscal expertise, despite what they might have contributed to the government, have failed to sufficiently reach out to the general public. In order to increase the people's awareness regarding the need for fiscal reform, the presence of and public confidence in these specialists as a bridge between the government and the people are indispensable. The general public, for their part, need to deepen their understanding of fiscal affairs and make appropriate decisions over the policy agenda that politicians put forward in election campaigns. Fiscal reform is a touchstone with which to test the power of the Japanese society as a whole based on the shared foundation of knowledge of the government, the general public and the experts.
