IMF urges Japan to settle debt problems

Featured - June 13th, 2012

The International Monetary Fund has urged the Japanese government to address its fiscal problems by tripling national consumption tax to at least 15%, adding pressure on Prime Minister Noda to win opposition backing for a consumption tax bill.

David Lipton, first deputy managing director of the IMF, told the Financial Times that Japan should urgently address the country’s fiscal problems.The nation is burdened with huge public debt, low growth and deflation.

The IMF further warns Japan of the impacts of the eurozone crisis, which could seriously hurt the country’s fiscal health if it fails to recover immediately. Japan’s gross public debt amounts to 235.8% of its GDP, compelling Fitch Ratings to downgrade the country’s credit rating by two notches from “AA” to “A+” last month.

Based on IMF’s annual assessment of Japan’s economy, real GDP growth will slow down from 2% to 1.75% in a span of a year. Lipton further called on the Japanese government to “move forcefully on many fronts” as “reducing debt to sustainable levels will require more”. The IMF also urged Japanese banks to take measures such as quantitative easing to tackle deflation.