International Monetary Fund. Asia and Pacific Dept
INTERNATIONAL MONETARY FUND
Abenomics has improved economic conditions and engendered structural reforms
but has not yet achieved a durable exit from deflation. The economy has expanded at
a pace above potential the last five consecutive quarters, and unemployment has fallen to
record low levels. Short-term fiscal stimulus and rising global demand have been key
drivers. However, inflation, public debt sustainability, and growth objectives remain to be
secured. Risks to the outlook are tilted to the downside, particularly in the medium term.
The current favorable economic environment is an opportunity to accelerate
reforms. A comprehensive and mutually reinforcing package of accelerated structural
reform, coordinated demand and income polices, strengthened policy frameworks, and
enhanced financial sector policies is needed. The reform agenda should prioritize
structural measures aimed at facilitating reflation (particularly labor market reforms to
boost wages), followed by policies to lift potential growth.