Japan needs to reduce its reliance on a weak yen to reflate its economy, the International Monetary Fund (IMF) warned, as it called on authorities to speed up “high impact” structural reforms and prepare for further monetary easing.
“The Bank of Japan needs to stand ready to ease further, provide stronger guidance to markets through enhanced communication, and put greater emphasis on achieving the 2 percent inflation target in a stable manner,” the IMF said in its 2015 Article IV Consultation with Japan published late Wednesday.
Under current policies, the central bank won’t meet its 2 percent inflation target in the medium-term, or over a five-year horizon, according to the international lender. After rising to 1.5 percent in mid-2014, core inflation – excluding fresh food and the effects of the consumption tax increase – has declined rapidly and has been close to zero since February 2015.
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