OECD Warns Japan About Structural Reforms

The Bank of Japan should stick with its expanded quantitative easing to achieve its inflation target, but this may not be enough to foster sustainable economic growth unless it is coupled with structural reforms, the OECD said on Tuesday.

Japan’s government should stay with its plan to double the sales tax to 10 percent, compile a detailed plan to return to primary budget surplus in 2020 and boost revenue from other taxes, the Organisation for Economic Cooperation and Development said.

The size of fiscal consolidation needed means Japan does face the risk of a spike in interest rates that would hurt the financial system due to its large exposure to Japanese government bonds, the Paris-based think tank said.

“The new quantitative and qualitative monetary easing should be implemented to meet the new 2 percent price stability target, although this may not be enough,” the OECD said in its economic survey of Japan.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza