The call came as the Fund slashed its growth forecasts for the world’s third largest economy and urged leaders attending IMF and World Bank meetings this week to take urgent action to revive demand globally.

Japanese Prime Minister Shinzo Abe has touted wage hikes as critical in ending years of stubborn deflation, but has so far gained only lukewarm support from private business.

The IMF recommended he take bolder action.

“Building on recent achievements, the authorities should consider adopting a softly enforceable wage growth target, supported by higher public sector and minimum wages,” the Fund said in its latest global outlook.

The Washington-based organisation commended the Bank of Japan for its latest policy easing in taking interest rates negative for the first time.

Yet it felt the central bank could do more by providing “stronger guidance” to markets on what policy changes might be considered should inflation continue to undershoot its 2 percent target.

The IMF itself forecast consumer prices would fall by 0.2 percent this year because of lower energy prices and the recent strengthening of the yen.

The Fund also halved its forecast for economic growth this year to 0.5 percent, flatlining from 2015. It even predicted the economy would shrink by 0.1 percent in 2017, partly due to the impact of a planned increase in sales tax.

The likely drag from that tax has made it political poison in Japan where Abe is under intense pressure to delay the hike.”Japan’s medium- to long-term growth prospects remain weak, primarily reflecting a declining labor force,” was the Fund’s sobering conclusion.

-Reuters