Notwithstanding its similarities to emerging Asia, the Japanese economy faces fiscal and demographic challenges similar to those of other advanced economies in Europe and the United States.
Japanese government spending helped propel the economy’s bounceback from recession, but it has also added to public debt, which the International Monetary Fund now projects will rise to 237 percent of gross domestic product (GDP) this year, the largest among the major advanced economies.2 Along with this high debt, aging of the population and slow GDP growth pose important concerns for fiscal sustainability.