The International Monetary Fund may upgrade its growth forecast for Japan, although the nation must start fiscal and structural reforms in 2014, IMF First Deputy Managing Director David Lipton was cited as saying in an interview in the Financial Times.
The IMF’s economic growth forecast of 1.2 percent next year will probably rise because of extra stimulus measures, the FT said, citing Lipton. The government expects gross domestic product to increase 1.4 percent, according to budget documents released Dec. 22. Prime Minister Shinzo Abe took office in December 2012 pledging a three-pronged, or a so-called three-arrow, strategy of aggressive monetary easing, fiscal stimulus and deregulation to end 15 years of deflation.
“The first year was a year of opportunity for monetary policy and I think they hit the target and showed they were changing the trajectory for the economy,” Lipton was cited as saying. “The second year they have the opportunity to show that the second and third arrows are potent. It doesn’t mean they have to finish but they really have to start.”
The Bank of Japan’s target of 2 percent inflation in about two years through the BOJ’s bond-buying program led to a weaker yen, which “the international community is supportive of,” Lipton said. The yen has lost about 18 percent of its value versus the dollar this year, according to data compiled by Bloomberg.