TCER WORKING PAPER SERIES SUSTAINABILITY, DEBT MANAGEMENT, AND PUBLIC DEBT POLICY IN JAPAN

may be quoted without explicit permission provided that full credit, including c○notice, is given to the source. The purpose of this paper is to analyze sustainability issues of Japan’s fiscal policy and then to discuss the debt management policy using theoretical models and numerical studies. We also investigate the desirable coordination of fiscal and monetary authorities toward fiscal reconstruction. We include a potential possibilities of the government bonds in our theoretical model The public bonds, therefore, cannot be sold when the issuance leads the amount of debt outstanding to be more than a certain level. In this respect, the fiscal authority has to take into account the upper limit of stocks of public debt. This possibility of debt default provides the fiscal authority to issue public bonds strategically in an earlier period. A strategic behavior of fiscal authority induces the monetar