The International Monetary Fund (IMF) on Monday urged Japan to speed up structural reforms and to implement a more accommodative monetary policy to make the most of its current expansion.
IMF First Deputy Managing Director David Lipton made the comments during a press conference here when he presented the IMF's annual evaluation of Japan's economy, reports Efe news.
"We feel the best policy is to make the most of positive (economic) momentum at present and to push ahead with needed reforms," Lipton said, according to a statement on the IMF website.
The IMF said the country's monetary policy should maintain a sustained accommodative stance and urged the Bank of Japan to carefully calibrate its yield curve policy, if downside risks materialised, and focus on capping long-term interest rates.
The financial organisation also proposed measures such as phasing out references to its annual purchase targets of government bonds set at 80 trillion yen ($721 billion), among others, aimed at improving its credibility and investor confidence.
Japan's economic expansion has been at its best since 2006, with GDP growing between January and March for the fifth consecutive quarter, thanks to huge external demand.
However, the IMF noted that labour shortages continue to plague the Asian country and that inflation remains moderate.
There are other significant challenges like "demographic headwinds and an unprecedented level of public debt", the Washington-based institution said.
The IMF expects Japan's growth to continue in 2017, but stressed it could weaken in 2018 "if fiscal stimulus fades as currently planned", adding that fiscal stimulus could support growth through "higher consumption and investment".
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)