International Monetary Fund urges Japan to make most of growth by pushing structural reforms

Bruno Cirelli
Giugno 20, 2017

Japan should commit to new gradual increases to its consumption tax rate, beyond 10 percent, to help rein in its substantial deficit, a new report from the International Monetary Fund says.

The IMF said the country's monetary policy should maintain a sustained accommodative stance and urged the Bank of Japan to carefully calibrate its yield curve policy, if downside risks materialised, and focus on capping long-term interest rates.

"We feel the best policy is to make the most of the positive (economic) momentum at present and to push ahead with needed reforms", IMF First Deputy Managing Director David Lipton told a press conference in Tokyo.

"What's important is the maintenance of the approach that has been laid out and accompanying it with structural and fiscal agenda", he said. The BOJ has set 80 trillion yen ($720 billion) as its annual purchase target.

The government of Prime Minister Shinzo Abe is now seeking to promote labor reforms, including imposing a binding cap on overtime hours and eliminating discrimination between regular and nonregular workers. Also it added that the fiscal rate might become contractionary in 2018-2020, due to the scheduled consumption tax hike in October 2019.

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