The IMF says Japan's "three arrows" economic stimulus program is boosting growth but is still pushing the country to follow through with fiscal and structural reforms.
It urged Tokyo to adopt a "credible" medium-term program that includes raising consumption taxes and deregulating farming and the service industry.
In its annual review of Japan's economy, the International Monetary Fund said on Monday the aggressive stimulus efforts of Prime Minister Shinzo Abe had given a strong boost to growth.
The lender forecast that the economy would hold to a two percent pace this year and inflation would pick up gradually.
But it warned that, in addition to monetary and fiscal stimulus efforts, the government must follow through with the "third arrow" - economic reform.
"All three arrows need to be launched for the policies to succeed. Uncertainty about the ambition of fiscal and structural reforms is adding to underlying risks," the Fund said.
"Failure to follow through on fiscal and structural reforms could, however, lead to overreliance on monetary policy with negative consequences for Japan and the global economy."
