Over the past twelve months or so, policy-makers have sounded more pragmatic about the need for further fiscal austerity. However, the reduction in the structural budget deficit in advanced economies as a whole will still be larger this year than in the recent past. And on current plans, the fiscal stance in Japan is set to switch next year from modest stimulus to substantial tightening. Overall, fiscal consolidation looks set to continue for at least two more years, albeit at a slightly reduced pace on aggregate. As such, it will continue to be a drag on global growth.
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