The Bank of Japan maintained its commitment to
quantitative easing, and a further expansion of
asset purchases is likely as inflation is not expected
to reach the central bank’s target before 2017.
Tax revenues have increased following the rise in
the consumption tax in April 2014 and the growth
in corporate profits, but achieving primary balance
by 2020-21 will be challenging, as spending
pressures on social security and defense remain
significant. Skill shortages in key services sectors continued to increase, as reforms that have
encouraged female labor force participation have
only partially offset demographic pressures on
labor supply. The tight labor market in the
services sector raises the prospect of a gradual
acceleration in wage growth.