Monetary and Fiscal Policy Management in Japan - Case Study Example

The monetary policy pertains to the availability, regulation, and cost of the credit for its utilization by the government for pursuing the agenda as per overall programs of the national government while fiscal policy primarily deals with the collection of taxes, payment of debts and to meet the expenditure for a specific period of time. Both these policies are inter-connected and inter-depended for making estimates, execution of the policy, and comparing the results in the public sector strategies and programs.

The Japanese economy has experienced a miracle growth phase during the post-Second World War period and up till the 1980s to become the second-largest economy in the world over and largest in Asia based on the real GDP, nominal GDP, and market exchange rates(1). The country has attained the status due to its monetary policies chiefly based on plenty of economic freedom, a system dominated by the private sector, and low tax rates. However, in the 1990s the country has experienced a “Lost Decade” and some of its structural issues continued to hold it back.

In Japan, the Ministry of Finance is the final authority to make management plans, regulations, and allocation of resources in the economy for making tangible impacts on the distribution of income and wealth among the general masses, promotion of economic growth and welfare, and ultimately to stabilize the level of economic activities in different sectors of the economy for making sustainable growth and development (2).The period starting from 1987 and ending on March 31st, 2008 will provide a guideline for future policymakers in the financial sectors in Japan.

The chief instrument through which the monetary and fiscal policies were regulated is the national budget at the national government’s level. The national budget is an important financial tool with the top-level decision making body in the Ministry of Finance to pursue their agenda of development and growth in all parts of the country on an equal basis depending on a number of variables like the level of existing development pattern, geographic location of the area and the composition and density of the population in that area.