The International Monetary Fund cut growth forecasts for Japan and warned Japanese Prime Minister Shinzo Abe that he must follow through on promised reforms to cement the good health of the world's third-largest economy. In of him"World Economic Outlook”, the IMF has forecast a growth of GDP equal to 1,4% against the previous 1,7%. The Fund also forecast a further slowdown to 1% for 2015.
The Washington-based organization had previously backed Abe's economic policy, a mix of state investment and monetary easing, called Abenomics and designed to pull Japan's economy out of years of stagnation and deflation. But now the IMF believes that the so-called "third arrow" of the plan, which includes a more flexible labor market and the signing of free trade agreements, is still only on paper, even if Tokyo has finally accepted an FTA with the Australia last Monday.
The accord marks the first comprehensive economic pact Japan has signed with a major Western economy. However, separate negotiations with the United States and ten other nations ahead of the Trans-Pacific Partnership have long stalled. Japan has been accused of being overprotective of domestic industry. Abe is trying to change that, while battling one of the largest government debts in the world. The Fund's judgment now is that "Abenomics has yet to translate into stronger domestic demand."
