The International Monetary Fund said Tuesday the Bank of Japan should pursue “powerful monetary easing” to increase the chance of meeting its 1 percent inflation goal by 2014, according to a statement published on the website of the Washington-based agency.
Japan could substantially expand its asset purchase programme in an effort to drive down lending rates to help achieve the inflation goal, the IMF said in the concluding statement, following its annual consultation mission.
It also urged the Japanese central bank to boost purchases of corporate bonds, equities, and highly-rated securitised loans to small- and medium-enterprises.
In addition, it called for the BOJ to broaden its asset-purchases to include Japanese government bonds of more than three years in maturity, as well to be more publicly forthcoming with its asset purchases in an effort to raise inflation expectations.
In a separate section of the report, the IMF said Japan should carry out a consumption tax of at least 15 percent, higher than the current proposals of a 10 percent tax, as part of efforts to improve the nation’s fiscal health.