Figure : International Monetary Fund Headquarter, Washington, DC (Source – Wikipedia)
The International Monetary Fund (IMF) has recommended that the Bank of Japan (BOJ) take a very gradual approach to raising interest rates, citing global economic uncertainty and domestic inflation risks. Despite stronger-than-expected growth driven by consumer spending and exports, the IMF warned that potential setbacks—such as renewed U.S.-China trade tensions—could weigh on Japan’s outlook.
Nada Choueiri, Deputy Director at the IMF’s Asia and Pacific Department, said inflation risks are balanced and that Japan is not falling behind in its policy response. She stressed the importance of relying on incoming data and maintaining flexibility in monetary decisions, especially as wage growth remains uncertain.
The BOJ, which raised its key rate to 0.5% earlier this year, continues to face challenges from a weak yen and rising import costs. Some policymakers are pushing for faster tightening, but inflation remains largely driven by external factors rather than domestic overheating.
On the fiscal side, the IMF advised Japan to keep any support measures targeted and temporary. With public debt already high, broad-based subsidies or tax cuts could worsen deficits without effectively supporting those most in need.
Source : Reuters, NHK World Japan
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