Japan’s economic policy goals commented by IMF

Japan’s economic policy goals commented by IMF

In a press release of today, IMF the International Monetary Fund, revealed details of the routine talks with the Bank of Japan and government representatives and came up with some interesting findings explaining the aims of Japan

Here are some extracts of the findings: “The new policies have gotten off to a promising start. Growth in the first quarter of 2013 rebounded strongly, led by consumption and net exports, and growth is projected to reach 1.6 percent for the year as a whole. Because of the rising impetus of private demand, growth in 2014 will slow only moderately to 1.4 percent despite fiscal consolidation resulting from the planned consumption tax increase and the unwinding of reconstruction spending. The rewards of a complete package of reforms are potentially large. Successful implementation would not only benefit Japan, but also strengthen growth and stability of the global economy”. The Bank of Japan (BoJ) is also gearing its policy to achieve a 2 % inflation rate in the near future.

To raise growth over the medium-term, structural reforms are critical. The government’s participation in the Trans-Pacific Partnership negotiations and its plans to raise the employment of women are important steps in this direction. But a broader effort is needed to generate growth synergies. Further measures include deregulation in agriculture and domestic services, encouraging the provision of risk capital for start-ups while phasing out costly government support for unviable SMEs. Reducing Japan’s excessive labour market duality will increase flexibility. Also, further relaxing entry requirements for high-skilled foreign workers could strengthen labour supply in areas where there are shortages.

 The IMF experts conclude that the recent large depreciation of the yen must be understood in the context of the critical and welcome effort of the BoJ to decisively exit from deflation. So long as monetary easing pursues domestic goals, and is accompanied by comprehensive fiscal and structural reforms, we do not see the yen’s recent depreciation as problematic.

www.itmf.org


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