Economic Policy Trilemma: Macroeconomic Politics in the 2021 Election

K Amano, SN Katada - Japan Decides 2021: The Japanese General …, 2022 - Springer
Japan Decides 2021: The Japanese General Election, 2022Springer
Highly accommodative monetary policy during nine years of Abenomics allowed fiscal
expansion to become the center of the Japanese government's COVID-19 stimulus and the
further economic measures were the primary issue facing the 2021 Lower House Election.
Under monetary constraints, the economic policy choice among Japan's conventional
growth strategy, distribution, and fiscal discipline creates trilemma, where the government
can pursue only two of these three goals. In this election, the LDP-Kōmeitō coalition …
Abstract
Highly accommodative monetary policy during nine years of Abenomics allowed fiscal expansion to become the center of the Japanese government’s COVID-19 stimulus and the further economic measures were the primary issue facing the 2021 Lower House Election. Under monetary constraints, the economic policy choice among Japan’s conventional growth strategy, distribution, and fiscal discipline creates trilemma, where the government can pursue only two of these three goals. In this election, the LDP-Kōmeitō coalition managed to straddle between distribution and growth strategy, while exploiting policy space for the opposition parties. Although the coalition maintained the electoral majority, the inroad made by Ishin, Reiwa, and the Democratic Party for the People whose campaigns neglected fiscal discipline in favor of both growth and distribution foreshadows the challenge against the Japanese government’s future fiscal health.
Springer
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