The International Monetary Fund urges the Bank of Japan to continue raising interest rates

Golden Finance reports that on April 4, despite the Middle East war having posed “major new risks” to Japan’s economic outlook, the International Monetary Fund (IMF) urged the Bank of Japan to continue raising interest rates. Against the backdrop of market expectations that the Bank of Japan may raise rates as early as April, the IMF put forward this recommendation. Driven by the conflict, rising oil prices and higher import costs caused by the yen’s weakness are intensifying the upward pressure on underlying inflation. In a statement, the IMF said that although economic growth is expected to slow somewhat (partly because of the war in Iran), moderate wage growth will support consumption. The risks facing Japan’s economic outlook and inflation are broadly balanced, and inflation is expected to return to the Bank of Japan’s 2% target level in 2027. As underlying inflation gradually moves closer to the Bank of Japan’s target, it should continue to raise rates gradually in a flexible manner, with good communication and data dependence, moving toward the neutral interest rate level. The IMF also emphasized that maintaining a flexible exchange rate regime is crucial, as it can serve as a reliable buffer for dealing with external shocks.