Table of Contents

The Global Financial Crisis and its Budget Impacts in OECD Nations

The Global Financial Crisis and its Budget Impacts in OECD Nations

Fiscal Responses and Future Challenges

Edited by John Wanna, Evert A. Lindquist and Jouke de Vries

The global financial crisis of 2007–09 constituted the biggest shock to the economies of the OECD nations since the Second World War and caused most of their governments to move into intense crisis mode. They made significant adjustments to their fiscal policy regimes, including massive interventions to stabilize markets and economies. But how they reacted to the crisis, and what measures they took to deal with it, still underpin their economic and budgetary positions. This singular shock provides the editors and authors of this book with an intriguing opportunity to examine how different OECD budgetary systems performed. Chapters cover the EU, North America and Asia, assessing how governments responded to the challenge and how their budget systems evolved in the aftermath.

Chapter 5: Budgeting in Japan after the global financial crisis: postponing decisions on crucial issues

Masahiro Horie

Subjects: economics and finance, public finance, public sector economics


The American subprime loan crisis that emerged in 2007–08 was seen by most Japanese people as a ‘fire on the opposite shore’. It was only after the collapse of Lehman Brothers on 15 September 2008 that Japan began to take the matter seriously as something that affected daily life. The situation in Japan after the Lehman bank collapse was suddenly quite different from the period before. This is why the 2008 global financial crisis (GFC) became known in Japan as the ‘Lehman Shock’. Japan experienced an earlier housing bubble collapse in the 1990s. The problem of non-performing loans in the financial institutions was solved by the infusion of a huge amount of public money. Experiencing the collapse in housing prices and being under the regulation and guidance of the government, Japanese financial institutions became cautious about exposure to high-risk lending. Hence, Japan largely assumed that the subprime fiasco occurring in the United States of America could not trigger a repeated banking crisis in Japan. Soon after the collapse of Lehman Brothers was reported, the Economic and Fiscal Policy Minister said: ‘It is just like a bee sting. Japanese financial institutions will never be harmed. A calm and decent response is expected.’ His remark was intended to prevent panicked behavior.

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