Overheating debate: Why not in Japan?

Egor Gornostay () and Madi Sarsenbayev
Additional contact information
Egor Gornostay: Peterson Institute for International Economics

No PB21-12, Policy Briefs from Peterson Institute for International Economics

Abstract: An intense debate has erupted over whether the unprecedented size of the US fiscal stimulus will cause the US economy to overheat and generate high inflation. To date, the debate has focused primarily on the United States, even though many other developed economies responded to the COVID-19 crisis with unprecedented economic stimulus packages. By some measures, Japan stands out: The total amount of its three consecutive stimulus packages is estimated to exceed 50 percent of its GDP, about twice as high as the US fiscal packages (about 26 percent of US GDP). However, overheating concerns are not being actively raised for Japan. This Policy Brief finds that although Japan’s headline number looks astonishingly high, the actual size of its discretionary fiscal measures is about 16 percent of GDP, substantially smaller than the total size of the US packages. US fiscal stimulus is the largest among Group of Seven (G7) countries relative to GDP, justifying the attention economists have given it. The United Kingdom is estimated to spend more than Japan as a proportion of GDP, but even the UK stimulus program markedly lags behind that of the United States. If additional stimulus measures making their way through the legislative process in Canada are counted, Japan’s fiscal stimulus looks even smaller and would amount to being only average in size among G7 countries. Given this and the lackluster performance of its economy in the first quarter of 2021, it is unlikely that Japan will find itself in overheating territory any time soon.

Date: 2021-06
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.piie.com/publications/policy-briefs/overheating-debate-why-not-japan (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iie:pbrief:pb21-12

Access Statistics for this paper

More papers in Policy Briefs from Peterson Institute for International Economics Contact information at EDIRC.
Bibliographic data for series maintained by Peterson Institute webmaster ().