International Monetary Fund: Call on the Bank of Japan to continue increasing interest rates
The International Monetary Fund urged the Bank of Japan to continue raising interest rates, even though the war in the Middle East poses “major new risks” to Japan’s economic outlook.
This proposal comes in light of market expectations that the Bank of Japan will raise interest rates in April, in order to confront increasing inflation pressures resulting from the significant rise in oil prices due to the ongoing conflict, in addition to rising import costs as a result of the weak yen.
The International Monetary Fund said in a statement issued from Washington on Friday after the end of its consultations with Japan on monetary policy, that although growth is expected to slow due to reasons including the war with Iran, gradual increases in wages will support consumer spending.
“The risks to the outlook and inflation are broadly balanced,” the fund said, with inflation expected to approach the Bank of Japan’s 2% target in 2027.
The IMF indicated in its statement that its Executive Board praised the high economic flexibility shown by Japan in the face of global shocks, and stressed that the Central Bank of Japan is taking appropriate measures to end the monetary easing policy.
“They note that as core inflation approaches the BOJ’s target, gradual increases in interest rates towards the neutral level should continue” under a well-publicised, data-driven and flexible approach, the statement added.
The Bank of Japan has completed a massive stimulus package in 2024 and has raised interest rates several times, including in December, on the grounds that Japan is close to achieving its 2% inflation target sustainably.
