2016.06.2008:11:00UTC+00IMF Says Achieving Abenomics' Targets Require Policy Upgrade

The International Monetary Fund said Japan will require a more sustainable and coordinated policy upgrade to achieve Abenomics ambitious targets in the current scenario.

Abenomics has met with initial success as strong coordination with the Bank of Japan and structural reforms narrowed the large output gap, reversed the undue appreciation of the yen and lifted inflation into positive territory, the IMF said in a statement on Monday.

But the recovery and progress with reflation stalled, the lender observed.

"Under current policies, the high nominal growth goal, the inflation target, and the primary budget surplus objective all remain out of reach within the timeframe set by the authorities," it said.

Income policies along with reforms to tackle labor market duality should move to the forefront, supported by additional monetary and fiscal stimulus in the near term and more credible policy frameworks.

Moreover, the fiscal strategy needs to commit to fiscal consolidation over the medium term and replace large discretionary consumption tax increases with a path of smaller, but sustained increases over a prolonged period.

The IMF said if such a package is not forthcoming soon, the timeframe for achieving all targets should be pushed out and policies should be reset for a more gradual progress.

According to IMF, income policies in combination with reforms to tackle labor market duality should move to the forefront, supported by additional monetary and fiscal stimulus in the near term and more credible policy frameworks.