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Spending Without TaxationFILP and the Politics of Public Finance in Japan$
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Gene Park

Print publication date: 2011

Print ISBN-13: 9780804773300

Published to Stanford Scholarship Online: June 2013

DOI: 10.11126/stanford/9780804773300.001.0001

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The Common Origins of Budget Restraint and FILP, 1945–1953

The Common Origins of Budget Restraint and FILP, 1945–1953

(p.55) Three The Common Origins of Budget Restraint and FILP, 1945–1953
Spending Without Taxation
Stanford University Press

This chapter explores the common origins of the Fiscal Investment Loan Program (FILP) and fiscal austerity. First, it describes the postwar government's experiment with industrial reconstruction, which set in motion the chain of events that led to the construction of the FILP system. Second, it shows how the experiment with priority production led to the imposition of fiscal and monetary restraint. Reconstruction Finance Bank (RFB)-induced inflation led the U.S. Occupation to impose a draconian fiscal and financial tightening known in the late 1940s. While the Dodge Line brought inflation under control, it unleashed a wave of opposition both inside and outside the government. The chapter analyzes how the political pressures created by the Dodge Line led the government to construct the FILP system. Finally, it considers why other countries also occupied by the U.S. military—West Germany and Italy—did not commit to low budget spending or create a system like FILP.

Keywords:   Fiscal Investment Loan Program, fiscal austerity, industrial reconstruction, priority production, fiscal policy, Dodge Line, U.S. occupation, inflation, low budget spending, monetary restraint

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