The Organisation for Economic Co-operation and Development on Thursday called for Japan to promote labor reforms by imposing a binding cap on overtime work and removing obstacles to women's employment because its job market is tight.

Wage growth remains "surprisingly muted" despite labor shortages, the OECD said in its report, adding that the pace of wage growth is a short-term uncertainty for the Japanese economy, which is expected to grow 1.2 percent in 2017.

The Paris-based organization also pointed out that Japan has a large gender gap in employment, even as women's participation in the workforce has increased. It called for raising child care capacity, reforming the tax and benefit systems, and improving work-life balance.