Japan Chair Platform: Japan's Other Spending Problem

Since the collapse of the bubble economy in the early 1990s, a combination of declining revenue growth, fiscal stimulus, and growing budget commitments have made Japan the most indebted country of the Organization for Economic Cooperation and Development (OECD). Attention to Japan’s growing public debt problem increased in the wake of Greece’s sovereign debt crisis, and the issue of how to go about fixing Japan’s finances shot to the forefront during July’s Upper House election as competing political parties put forth ideas from trimming wasteful spending to increasing taxes to reducing budget deficits and debt. But until just a short while ago, a different kind of public spending problem consumed the domestic agenda. From the 1990s, various administrations expended a remarkable amount of energy and political capital trimming back public works spending, rationalizing and abolishing a panoply of public corporations, and privatizing the enormous postal savings system. The target of these reforms was not the formal budget, but a large off-budget system known as the Fiscal Investment Loan Program (FILP). After more than a decade of reform, FILP has died down as a political issue but deserves a fresh look as the government begins to address larger fiscal issues.