The Bank of Japan should remain data-dependent and continue to gradually raise policy rates in line with inflation rates, the International Monetary Fund said on Thursday, adding that the central bank is on track to bring price increases back to its annual target of 2% .
“Our advice is that the BOJ should remain data-driven and gradually raise the policy rate over its policy horizon if inflation forecasts show this is the right way forward,” IMF spokesperson Julie Kozack said at a regular news briefing. .
Japan’s new Prime Minister Shigeru Ishiba said on Wednesday that Japan is not in an environment that requires an additional rate hike, a comment interpreted by markets as reducing the chances of a hike in the near term.
Ishiba has also promised new fiscal measures to protect many households from the impact of higher prices.
Kozack said Japan’s economy continued to grow, but broad price increases kept headline inflation above the BOJ’s 2% target.
“Our assessment is that over the medium term the economy remains on track to achieve the 2% target in a sustainable manner,” Kozack said, adding that Japanese fiscal policy should focus on “growth-friendly” fiscal consolidation to rebuild buffers build and secure debts. sustainability.
This fiscal consolidation could be supported by both revenue and expenditure measures, and would help maintain market confidence in the sustainability of Japan’s debt, “which is of course essential for Japanese growth,” she added.
