The IMF said today that Japanese Prime Minister Shinzo Abe’s eponymous economic revitalisation plan needs to be “reloaded” with steps to increase incomes and achieve labour reforms to meet ambitious growth and inflation targets.
Abe swept to power in late 2012 on a pledge to kick-start the world’s No 3 economy with his “Abenomics” policy blitz — a mix of massive central bank monetary easing, government spending and efforts to slash red tape.
The plan got off to a promising start as it sharply weakened the yen, a plus for Japan’s exporters, which set off a stock market rally. But promised reforms have been slow in coming and doubts are growing about its prospects for success.
“Abenomics has made progress in revitalising the Japanese economy but sustained higher growth and inflation remain elusive,” the International Monetary Fund said in a report at the conclusion of annual talks in Tokyo.
It added that in order to achieve those targets a “more substantial, coordinated policy upgrade”, including steps to boost incomes and achieve labour reforms, are needed.
“Abenomics needs to be reloaded,” it said, adding that monetary and fiscal policies alone cannot realise the government’s two percent inflation target.
Abe has been pushing stingy companies to boost workers’ wage packets, but Toyota only lifted workers’ monthly pay by 1,500 yen (USD 14) despite record profits.
The IMF called for the government to ensure that profitable companies lift basic wages by at least three percent and reduce the gap between lifetime workers and growing numbers of so-called non-regular workers who often lack benefits.
Japan also needs to gradually raise the country’s consumption tax “towards at least 15 per cent” gradually “over regular intervals” to achieve fiscal sustainability and growth, the report said.
Abe announced earlier this month that he will delay a consumption tax hike, planned for 2017, to late 2019, when he is likely no longer in office.
The decision threatened to rekindle fears about Japan’s ability to finance a staggering national debt, one of the worst among rich nations as the population rapidly ages.
Last year, the government postponed raising the tax from the current eight percent to 10 per cent until April 2017.