According to a report published by the International Monetary Fund (IMF), BoJ's continued accommodative policy stance needs to be accompanied by bold structural reform, credible fiscal consolidation plan.
• Japan near-term fiscal stimulus should be neutral in 2018, avoiding scheduled withdrawal of fiscal stimulus
• The real exchange rate appreciated substantially 2015-16 to a level consistent with medium-term fundamentals
• Japan inflation likely to stay below 2% target over medium-term
• Japan economic growth momentum to continue in 2017, weaken in 2018 if fiscal stimulus fades - risks to economic outlook tilted to downside
• BoJ should carefully calibrate yield curve policy, if downside risks materialize, to provide additional easing
• Japan mid-term fiscal plan should place emphasis on gradual sales tax hikes, starting as soon as possible, to at least 15%
• Search for higher yields in Japan brings new and less understood risks
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