Source: International Monetary Fund
Headline: Japan 2017 Article IV Press Conference Opening Remarks by David Lipton, IMF First Deputy Managing Director
June 19, 2017
Good afternoon. It’s a pleasure to be back in Tokyo.
Over the last few days, I met with Deputy Prime Minister Aso, Minister
Kato, BoJ Governor Kuroda, FSA Commissioner Mori, and other senior
officials. You have received a copy of our concluding statement so I will
limit my remarks to our main findings.
This year’s Article IV Consultation—done in tandem with a comprehensive
assessment of the financial sector, the so-called FSAP—focused on the
opportunity afforded by current positive economic momentum to push forward
with reforms under Abenomics and the new Work Style Reform agenda to secure
sustained and inclusive growth, raise inflation, and achieve fiscal
Under current policies, we expect growth of 1.3 percent this year and 0.6
percent in 2018. Inflation is likely to move upward slowly, but remain
below the 2 percent target in the next few years. The financial sector
remains stable, but banks and insurers face a challenging environment as
low interest rates have reduced profitability and led to a search for
higher yields—bringing new and less understood risks.
Given this context, we feel the best policy is to make the most of positive
momentum and push ahead with needed reforms.
A well-coordinated reform package should combine continued fiscal and
monetary support with structural reform, income policies, and steps to
contain financial sector risks. Key elements should include:
Labor market reforms to increase productivity and boost wages.
Closing gaps between regular and non-regular workers, increasing
mobility across firms, and “equal pay for equal work” are key to
boosting overall wages.
Measures to increase private investment and long term growth.
Product and services market reforms, further corporate governance
reform, and efforts to ensure credit is available to small and
medium size firms can enhance investment and growth prospects.
Measures to diversify and enhance labor supply. Further support for
female and older workers and increased use of foreign labor are
needed. This means eliminating disincentives to full-time work
embedded in the tax and social security systems; increasing
availability of childcare and nursing facilities, and reducing
Coordinated near-term monetary and fiscal support should combine
with income policies.
Monetary policy should maintain a sustained accommodative stance,
and provide additional easing if downside risks materialize;
The near-term fiscal stance should be at least broadly neutral in
2018, avoiding the scheduled withdrawal of fiscal stimulus. Steady
medium-term fiscal consolidation is needed to contain public debt,
and should move in line with evolution of the economy. The 2018
fiscal review is an important opportunity to set sound medium term
fiscal targets and specific budget measures.
Income policies—such as increasing administratively controlled
wages and incentivizing private firms to raise wages—should
complement and amplify monetary and fiscal support.
Enhanced financial oversight and strengthened corporate governance
among banks and insurers would help contain emerging risks. Crisis
management and resolution frameworks could be strengthened; and
dialogue should continue with financial institutions on how to
adjust to macroeconomic and demographic trends.
This policy package needs to be implemented in a decisive and well
coordinated manner. We see this is the best way to make substantive
progress toward the government’s objectives.
Turning to the external position, while the 2016 current account balance
was just moderately stronger than warranted by medium-term fundamentals and
desirable policies, the real exchange rate appreciated substantially
between 2015 and 2016, moving it to a level consistent with medium-term
fundamentals. Ultimately, a strong and coordinated set of domestic policies
is the best way to secure external balance over the medium term.
Let me stop with these introductory comments and take any questions you may
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