The International Monetary Fund (IMF) has said that it does not see a weak yen as problematic, offering support to Japan’s monetary easing, as long as fiscal and structural reforms are kept in view over the longer-term and inflation is kept under control.
The IMF was speaking following an annual review of Japan’s economic policies. The body largely approved of Japan’s expansion of monetary easing on 4 April, but warned that comprehensive fiscal and structural reforms to the labour market and other sectors of the Japanese economy were still needed. The IMF also stated that it believes the weak yen, encouraged by monetary easing, will bear little bearing on the future of the economy, although the domestic government is obviously hoping that it can help exports. The credit rating agency, Fitch, earlier warned that monetary easing was no panacea for the long-term problems of Japan.
The Bank of Japan is currently taking steps to contain excessive volatility in the government bonds market, according to an approving IMF, which also recently gave its overview of China’s economy.
In its review, the IMF also said that the BoJ could still achieve its two per cent inflation target in the near to medium future if the desired fiscal and structural reforms were implemented.
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The central bank has tweaked its stimulus programme and is making a fresh effort to push Japan’s inflation rate above its 2% target.