JAPAN must be mindful of the risks of its massive monetary stimulus and speed up much-needed structural reforms to revive the economy, the Organization for Economic Cooperation and Development (OECD) said yesterday, warning of delays in their implementation.

    Prime Minister Shinzo Abe’s policies to revive the economy have been dubbed Abenomics, and the OECD report pointed to the mixed results of a strategy dependent on “three arrows” — massive monetary expansion, fiscal stimulus and structural reform.

    OECD Secretary-General Angel Gurria said that while the Bank of Japan’s stimulus — dubbed “quantitative and qualitative easing” (QQE) — cut borrowing costs and helped boost the economy, there were limits to what monetary policy can do.

    “The first arrow is working, but there are limits,” Gurria told reporters after issuing a report on recommendations for Japan, suggesting that no additional monetary easing was necessary for the time being.

    “Structural reforms are not in the hands of central banks.”

    The OECD also urged Japan to boost labor productivity and remove trade barriers, stressing that the structural reforms that make up the “third arrow” have lagged the first two arrows of monetary and fiscal stimulus.

    “The third arrow of Abenomics is its most crucial component, without which the unprecedented monetary expansion and the fiscal effort will not succeed in putting Japan on a path to faster growth and fiscal sustainability,” it said.

    On the weak yen, Gurria urged Japanese firms to use the current window of opportunity to export as much as possible since the yen will rebound once economic growth picks up pace.

    “Over the medium to long term, if Japan is successful (in reviving the economy) the yen will strengthen.”(SD-Agencies)