FXStreet (Łódź) - In its annual report on the state of Japan’s economy the International Monetary Fund said on Thursday that Japan’s financial stability could be endangered if the country fails to continue implementing economic reforms included in PM Shinzo Abe’s “Three Arrows” agenda and doesn’t carry out the second stage of the sales tax hike.

In such case the yen could “weaken unduly,” although the IMF currently considers it “'broadly consistent with medium-term fundamentals.”

Moreover, the report states that the Bank of Japan’s monetary policy is “appropriately accommodative'”and that no further easing is necessary at this point but that the central bank should act swiftly if inflation or growth slow down excessively.The IMF sees Japan’s economy expanding by 1.6% in 2014 and by 1.1% in 2015.

The report also recommends Japan urgently draws up a post-2015 fiscal consolidation plan.

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