IMF backs Japan’s ’Abenomics’, but warns of risks
The IMF, which expects the world’s third-largest economy to grow 1.6 per cent this year, said Prime Minister Shinzo Abe and his hand-picked team at the Bank of Japan were on the right track.
The International Monetary Fund on Friday gave a cautious thumbs up to Japan’s economy-boosting efforts, but warned there are “considerable downside risks” if Tokyo doesn’t chop its huge national debt.
The Washington-based IMF, which expects the world’s third-largest economy to grow 1.6 per cent this year, said Prime Minister Shinzo Abe and his hand-picked team at the Bank of Japan were on the right track in their bid -- dubbed “Abenomics” -- to reverse years of falling prices.
David Lipton, the first deputy managing director of the IMF, also told a news conference that the yen’s current depreciation was not problematic if accompanied by fiscal and structural reforms Abe has promised to deliver.
“The authorities have embarked on an ambitious agenda to raise growth and inflation,” the IMF report said.
“The new policy framework... provides a unique opportunity to end decades-long deflation and sluggish growth, and reverse the rise of public debt. The rewards are potentially large.”
But Abe -- whose plan to boost growth with big spending and aggressive central bank easing which has sharply weakened the yen -- must make good on pledges for more reforms, including bringing more women into the workforce, it added.
“Despite the strong start, there are considerable downside risks to the outlook,” the IMF said.