The sustainability of Japan's public finances is a very important issue. This project will research the ideal forms of policies related to fiscal issues through theoretical analysis of subjects such as an open-economy fiscal theory of the price level (FTPL) model. For example, it will study whether a policy of increasing holdings of foreign assets by the government sector would be effective for avoiding or mitigating a rapid collapse in government bonds. It also will analyze the mechanisms by which a drop in the prices of government bonds brings about a bank crisis and consider policies for avoiding such a situation. In addition, it will study a broad range of issues concerning macroeconomic policies including financial crises and intergenerational equity.
May 30, 2011 - March 31, 2013