Key policy targets of abenomics remain “out of reachˮ: IMF

August 1, 2017

WASHINGTON- The Japanese government has yet to achieve its policy targets set under Prime Minister Shinzo Abe's Abenomics economic policy mix as inflation remains "stubbornly low," the International Monetary Fund said Monday. "Abenomics has improved economic conditions and engendered structural reform, but key policy targets remain out of reach under current policies," the IMF said in a report on its annual assessment of the Japanese economy. With its three arrows of monetary easing, flexible fiscal spending and structural reform, Abenomics "has helped ease financial conditions, increase corporate profits, and boost employment and female labor force participation," the report said. "Nevertheless, inflation is well below target," it said, referring to the 2 pct inflation target set by the Bank of Japan. The IMF called on the BOJ to maintain its accommodative monetary policy stance. The IMF said the Abe government should promote further structural reform and adopt a credible and gradual fiscal consolidation plan in the medium term. The report noted "progress" on the trade policy front, including efforts to pursue the implementation of the Trans-Pacific Partnership free trade agreement among the remaining 11 countries after the United States left the multilateral pact in January under the policy of President Donald Trump. The IMF also welcomed a broad deal reached between Japan and the European Union on their envisioned economic partnership agreement in early July. The IMF projected that Japan's real gross domestic product growth will slow to 0.6 percent in 2018 from 1.3 percent in 2017 as fiscal stimulus measures are seen weakening. "Coordinated demand and income policies would help boost inflation and shift the economy to a durable growth path," the report also said. The IMF underlined the need for Japan to review its regulations in the labor market and the energy sector. As a measure to improve fiscal health, the IMF again proposed Japan raise the consumption tax rate by 0.5 to 1.0 percentage point at regular intervals until it reaches at least 15 percent, against the current 8 percent. Jiji Press