TOKYO -- The Organization for Economic Cooperation and Development said Japan must put special emphasis on increasing the participation of women in the labor force for Abenomics to work.

In its 144-page "Economic Survey of Japan," released Wednesday, the organization called the initial results of Prime Minister Shinzo Abe's recipe for economic revival encouraging. However, the report said the most important component of the policies, structural reform, known as the "third arrow," urgently needed to be stepped up.

"Living standards in Japan are well below the top half of the OECD," the authors wrote at the beginning of the report. Two decades of sluggish growth and persistent deflation have left Japan's relative per capita income 14% lower than the average for the top half of the OECD countries. In the early 1990s, it was on a par with these wealthier nations. Japan's relative poverty rate is 16.1 %, notably higher than the OECD average of 11.1%, and it further increased in 2012.

To counter the trend, Japan needs bold structural reforms the report said. The working-age population -- those aged 15 to 64 -- is falling by more than 1 million a year. It is projected to decline by 17% by 2030 from current levels, and by nearly 40% by 2050. If the female participation rate, currently 63%, were to match that of men, 81%, the labor supply would decline only 5% by 2030, according to the report.

Japan's child care budget is woefully inadequate, the report said. The country spends about a third as much on after-school care as Sweden and the U.K. as a share of gross domestic product. That is one reason only 38% of women remain in the labor force after having babies. The Abe government plans to boost the number of child care and after-school care facilities, but the OECD says there is more to be done. The tax system should be reformed: It is currently financially advantageous for many young mothers to stay at home.

Hours at the office are another problem, the OECD said. "Indeed, Japan's well-being index shows that its work-life balance is one of the worst in the OECD, which contributes to its low birth rate," they concluded.

The report also said that wage growth is key to output growth. "With the working-age population falling 1.5% a year and firms already reporting the highest level of labor shortages since the early 1990s, workers are likely to obtain significant pay increases in the spring 2015 wage negotiations, pushing real wage growth into positive territory and helping support private consumption." Yet, given low labor mobility because of the Japanese so-called lifetime employment system, "wages react slowly to changing labor market conditions."

Abe's first and second arrows -- bold monetary easing and flexible fiscal policy -- also featured in the report. The Paris-based organization encourages the Bank of Japan to continue monetary expansion to raise inflation to the 2% target. They said the top fiscal priority is to reduce government debt by constraining government spending, raising the consumption tax, broadening the personal and corporate income tax base, and reforming pension and health care to limit spending growth.

The OECD report included a long-term debt simulation, projecting that Japan's extraordinarily high debt ratio remains fairly constant if nominal GDP growth averages 1.5%. However, if nominal growth were to reach 4%, the same fiscal consolidations would put the debt ratio on a "steady downward trend."

Economic surveys on Japan are published by the OECD every two years. The last was written in April 2013.