Fiscal Inflation in Japan: The Role of Unfunded Fiscal Shocks

Takeki Sunakawa

No HIAS-E-151, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University

Abstract: We investigate the extent to which fiscal factors have contributed to inflation in Japan over the past four decades. Despite sustained fiscal expansion and rising debt since the 1990s, inflation remained low until recent years. Using the medium-scale DSGE model developed by Bianchi et al. (2023), we estimate the model with Japanese data and find that, in contrast to the U.S. case, unfunded fiscal shocks are not the main drivers of inflation in Japan. Instead, real demand and supply shocks, along with accommodative monetary policy, have played more significant roles in shaping inflation dynamics., First draft: July 2005. This draft: September 2025

Keywords: Inflation; Fiscal Theory of Price Level; Japan (search for similar items in EconPapers)
Pages: 37 pages
Date: 2025-09
New Economics Papers: this item is included in nep-cba, nep-dge, nep-his and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hiasdp:hias-e-151

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