Abstract: In this paper, we use the uncertainty index of Japanese economic policy issued by Baker et al to study the characteristics of Japanese economic policy uncertainty. The uncertainty of Japan’s economic policy has obvious “political parties”, which is closely related to the frequent political elections in Japan. In addition, the high uncertainty of Japan’s economic policy lasted for a long time. Based on the data after the Japanese bubble economy, we find that the uncertainty of economic policy has a significant negative impact on the final demand. Therefore, it is proved that the uncertainty of economic policy is an important driving force for the recession, which provides a new explanation for the long decline of the Japanese economy after the bursting of the bubble economy.

Key words: economic policy uncertainty, economic recession, final demand, MSAR model