Japan: IMF recommends revamping Abenomics – Nomura

Takahide Kiuchi, Executive Economist at Nomura, explains that the IMF’s concluding statement of its 2018 Article IV Consultation with Japan suggested that Abenomics should be revamped to improve the policy’s efficacy and credibility.

Key Quotes

“In particular, the IMF noted that the BOJ's communications with the financial markets were problematic, lowering policy credibility and possibly reducing the effectiveness of the central bank’s policy. In addition, the IMF pointed out that the low interest rate environment was hurting the profitability of regional financial institutions and destabilizing Japan’s financial system.”

“The IMF also emphasized the need for strengthening the framework for realizing a sustainable fiscal environment and making further progress in structural reforms.”

“The government’s response could contribute to greater stability of Japan’s financial system if it focuses on improving fiscal sustainability and the profitability of financial institutions.”

“Abenomics policies to date have sought to implement various structural reforms with a view toward raising productivity. However, estimates of Japan’s potential growth rate and other indicators provide no clear evidence that these policies have generated the desired effect of improving productivity.”

“Revamping Abenomics should probably start with a comprehensive examination of why structural reforms implemented to date have not produced the desired results and where these reforms went wrong.”