IMF urges Japan to boost foreign, female, elderly labor participation

The International Monetary Fund urged Japan on Monday to promote the use of foreign workers and the participation of women and elderly people in the labor market as part of efforts to address challenges for achieving firmer and sustained growth.

In its assessment of Japan’s economy following annual consultations with the government, the IMF suggested that Japan advance “reforms to bolster investment as well as diversifying and enhancing labor supply to raise potential growth.”

“To this end, full-time work, female and older labor market participation, and use of foreign labor should be facilitated,” the Washington-based institution said in a report.

The IMF expects Japan’s growth momentum to carry through this year but weaken next year if fiscal support fades as currently scheduled, the report said.

Recent growth, bolstered by fiscal support and firmness of the world economy, “could be temporary,” it said.

Measured by real gross domestic product, the IMF estimates the world’s third-largest economy will grow 1.3 percent in 2017, up from 1.0 percent in 2016. Growth, however, is projected to slow to 0.6 percent in 2018.

“The possible expiration of fiscal support in 2018, together with a smaller expansion in foreign demand would reduce the rate of growth, despite an anticipated Olympics-related boost in private investment,” the report said.

The IMF offered a positive assessment of recent movements of the yen, saying, “The substantial real effective exchange rate appreciation in 2016 had moved the yen to a level consistent with fundamentals.”

To underpin Japan’s growth, the Bank of Japan should maintain its accommodative monetary policy, the IMF said.

Citing the need for fiscal consolidation to address risks from Japan’s high level of public debt, the IMF “broadly supported” a pre-announced path for a gradual and sustained increase in the consumption tax.

Japan plans to raise the tax to 10 percent from 8 percent in October 2019.

However, a few IMF directors pointed to risks associated with implementing the planned tax hike, apparently in light of the uncertain outlook for the nation’s economy.

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