Economic and fiscal management under the Democratic Party of Japan (DPJ) administration

Japan experienced a major change of government in September 2009. It was a remarkable political event, because Japanese politics was dominated by the Liberal Democratic Party (LDP) in almost all the years following the end of World War ll. The new coalition government led by the Democratic Party of Japan (DPJ) tried to overhaul and restructure public administration and policy making in order to strengthen political leadership. In particular, they wanted to reform budgetary institutions as they fully recognised the LDP governments’ wasted public money that brought about huge fiscal deficits. They introduced new medium-term fiscal targets and planning, programme reviews, and tax expenditure report, and legislated laws to increase the rate of consumption tax from 5% to 10%. However their reforms were not successful as expected and ended in larger fiscal deficits. This paper analyses the economic and fiscal management of the DPJ Administration and why they couldn’t succeed in reforming budgetary institutions.