Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/238675 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 985
Publisher: 
Levy Economics Institute of Bard College, Annandale-on-Hudson, NY
Abstract: 
Modern Money Theory (MMT) economists have used Japan as an example of a country that demonstrates that high deficits and debt do not lead to insolvency, high interest rates, or inflation. MMT insists that governments that issue their own sovereign currency cannot be forced into insolvency, that they can make all payments as they come due, and that they do not really spend tax revenue or borrow in their own currency-with Japan serving as an example of a country that does not face financial budget constraints as normally defined. In this paper we evaluate whether Japan is the poster child of MMT and argue that policy-wise Japan is not following MMT recommendations; in fact, it is generally adopting policies that are precisely the opposite of those proposed by MMT, consistently adopting the path of stop-go fiscal measures and engaging in inadequate and temporary fiscal stimuli in the face of recessions, followed by austerity whenever the economy has seemed to recover.
Subjects: 
Modern Money Theory
Budget Deficits
Sovereign Debt
Japanese Government Debt
MMT Policy
JEL: 
E12
E32
E42
E58
H62
H63
Document Type: 
Working Paper

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