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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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Pushing the Limits of the FILP Compromise, 1970–1990

Pushing the Limits of the FILP Compromise, 1970–1990

(p.141) Six Pushing the Limits of the FILP Compromise, 1970–1990
Spending Without Taxation
Stanford University Press

This chapter covers the critical period from 1970s through the 1980s that led to the accumulation of problems in the Fiscal Investment Loan Program (FILP) system. As political pressure on the Liberal Democratic Party (LDP) increased and the economy suffered several economic shocks, Japan's budget situation deteriorated significantly. The government, in particular the Ministry of Finance (MOF), increasingly relied on FILP to fill in budget gaps and to deflect pressure on the budget. MOF pushed budgetary requests onto FILP, often without sufficient consideration of the financial risk of such decisions. By the 1980s, this strategy succeeded in restoring a degree of budget discipline and helped bridge the gap between fiscal hawks and the pork-barrel wing in the ruling coalition, but it did so at expense of the FILP system. As a consequence of subordinating FILP to fiscal and political ends, bad loans and project failures accumulated over the long term.

Keywords:   Fiscal Investment Loan Program, fiscal policy, low budget spending, Ministry of Finance, Liberal Democratic Party, Japan

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