IMF Official in Interview: ”Japan must take Abenomics even further”

”A: The decision makes sense in light of the pace of growth in the country and the pace of growth in the global economy. At the same time, I think it’s important that attention be put on securing sustainable public financing in the long run. I think a postponement makes sense because the economy needs fiscal support rather than fiscal contraction right now. But at the same time, we would like to see a redesign of the consumption tax, where it’s introduced with increases coming in small percentages every year in the regular way, so that the decision is not political. It’s automatic, so that the effects aren’t so big, so that the growth needs of the economy can be taken care of.

But we certainly agree that the amount of public debt will need to be brought down. Getting to a primary balance is an important goal. [Japan needs to] continue to make progress in consolidation and make sure that public financing is made sustainable.

Q: Some commercial banks are critical of the negative interest rate policy the Bank of Japan introduced in February. How would you assess the impact?

A: I think the BOJ has been doing the right things in trying to support the economy with unconventional policies. All elements of QQE [qualitative and quantitative monetary easing] have been pushing in the right direction. We think adding a negative interest rate, a new element, was a useful idea. Even when [the interest rate] turns negative it can support growth, because a lower interest rate tends to raise the rate of return on investment and tends to raise asset prices, which in turn encourages spending of the various kinds…….”

Read full interview here.

Source: Nikkei Asian Review

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