TOKYO (AFX-ASIA) - The domestic economy will enjoy a slight recovery in the second half of 2002, the secretary general of the Organisation for Economic Cooperation and Development (OECD) said, while calling on Tokyo to speed up a drastic reform pledge. "The OECD forecasts a mild upturn of the Japanese economy beginning in the second half of this year largely stimulated by the recovery in the United States," Donald Johnston told a Tokyo symposium organised by the OECD, the Keidanren group of business leaders and the Nikkei financial newspaper. But the government should not become complacent about implementing wide-sweeping reforms despite signs of the economy improving, Johnston said. Problems blighting the economy are mostly structural. "The OECD already recognises signs the economy is reacting to past and on-going reforms. A large number of small but clearly positive changes has been noticed," Johnston told the symposium, which was also attended by Japan's minister for economic and fiscal policy Heizo Takenaka. Takenaka underlined the necessity for progress with a reform pledge made by Prime Minister Junichiro Koizumi when he took office almost a year ago. "Of course we look for cyclical recovery, but we recognise this recovery is not going to be robust. So the next two years are going to be an intensive adjustment period," Takenaka said. Japan is successfully reforming its system of remuneration and salaries based on merit, said the OECD secretary general, adding he is also impressed by the resilience of firms to still go public despite the ailing economy. However, "many companies are too bureaucratic," Johnston said. "Female entrepreneurs represent a talent that is almost entirely neglected." The Paris-based organisation does not deny the necessity for macro-economic policies on top of structural reforms and "will call for fiscal policy not to be too restrictive and monetary policy to ease further," said Johnston. Richard Koo, chief economist at Nomura Research Institute believes in a revival of fiscal policy to boost economic activity, as businesses are preoccupied with cleaning up their accounts and reducing debts, which have become more of a burden due to Japan's fierce deflation. "Companies go from profit maximisation to debt minimisation. We need to have fiscal policy," Koo said at the symposium. Changes in Japan's society and economy must be seen as a chance for the country, concluded Johnston. "Population aging opens an enormous market to meet the needs of the elderly." The migration of business to cheaper Chinese shores was inevitable and will force Japanese enterprises to increase the value of home-grown products, he said.