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OECD chief credits loose monetary policy for averting catastrophe
[TOKYO] The head of the OECD on Wednesday credited a wave of loose monetary policy for preventing a global economic collapse, but warned it was now up to governments to lift growth and safeguard their economies.
Angel Gurria, secretary-general of the Organisation for Economic Co-operation and Development, made the comments in Tokyo where the 34-member club of rich nations was presenting its latest report on the Japanese economy.
The world owes a "debt of gratitude to central bankers" for supplying easy money that brought the global economy back from the brink after the 2008 financial crisis, Mr Gurria said.
"They have done a great job. Without central bankers...we would be in a bigger problem," Mr Gurria told reporters.
"But the problem is now structural changes (that) are not in the hands of central banks. Education, innovation, more competition, better regulations...These have nothing to do with central banks," he added.
While the Bank of Japan's massive monetary easing programme has boosted growth, Mr Gurria said the country's living standards lag the OECD average, and Tokyo must press on with an overhaul of the highly regulated economy, including luring more women into the workforce, shaking up a rigid labour market, and lifting productivity.
A string of central banks - including the European Central Bank, the Reserve Bank of India and the Bank of Korea - have launched monetary easing schemes or cut interest rates to prop up their ailing economies.
Meanwhile, the US Federal Reserve announced it was ending its own six-year quantitative easing scheme as the world's top economy gets back on track.
Mr Gurria also warned that Japan had to get a handle on its massive national debt - the heaviest burden among OECD members at more than twice the size of the economy.
Tokyo raised the national sales tax in April 2014 to 8.0 per cent from 5.0 per cent to help pay down that debt load, but the move slammed the brakes on growth and sent the economy into a brief recession.
Prime Minister Shinzo Abe delayed a second tax rise to 10 per cent scheduled for this year, but that rate is still only about half the OECD average of 20 per cent, Mr Gurria said.
A day after the International Monetary Fund raised its growth projections for Japan, the OECD on Wednesday hiked its forecasts to a 1.0 per cent expansion this year and 1.4 per cent next, up from an earlier 0.8 per cent and 1.0 per cent, respectively.
Mr Abe launched his economic growth blitz in 2013, dubbed Abenomics, combining huge monetary easing, big government spending and promises to overhaul Japan's economy.
But there is still a lot of work to do on the so-called third arrow of his plan - reforms.
"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," the OECD's report said.