IMF Head Says Japan Deflation is Nearly Over

The head of the International Monetary Fund Rodrigo de Rato said Thursday that deflation has, by most measures, ended in Japan and that with more economic reform efforts, Japan will overcome significant challenges to come.

De Rato said that the International Monetary Fund does not see inflationary pressures in the country. He insisted that Japanese economy regain sustainability in its public finances and raise potential growth in a non-inflationary manner.

He pointed out that prices are increasing in Japan for oil and consumer products, and inflation is the greatest threat to both the country and the world. He suggested that central banks in Japan and other countries need to keep their eyes on the public's expectations for inflation.

De Rato says, instead of slowing down, Japan needs to go boldly by encouraging more workforce into the labor market, as well as more domestic and international competition.

We believe that there is a case for somewhat more ambitious and front-loaded adjustment to take advantage of the recent upswing, to set the debt ratio in a declining path, and to allow more room for maneuver in the future, De Rato said.

He suggested that less cuts in expenditures are to be expected and that more approaches be used to utilizing both expenditures and taxes.