IMF Urges BOJ to Maintain Gradual Rate Hikes, Balancing Inflation and Growth

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IMF Urges BOJ to Maintain Gradual Rate Hikes, Balancing Inflation and Growth

The International Monetary Fund (IMF) has advised the Bank of Japan (BOJ) to continue gradually raising policy rates in line with inflation data. The IMF believes that the BOJ is on track to bring price increases back to its 2-percent annual target.

IMF spokesperson Julie Kozack said that the BOJ should continue to be data-driven and to gradually raise the policy rate over its policy horizon, if the inflation forecasts bear out that this is the right way forward.

Japan's new prime minister, Shigeru Ishiba, has said that Japan is not in an environment requiring an additional rate hike. Ishiba has also pledged new fiscal measures to cushion many households from the impact of higher prices.

Kozack said that Japan's economy was continuing to grow, but broad price increases were maintaining headline inflation above the BOJ's 2-percent target.

The IMF believes that Japan's economy is on track to achieving the 2-percent target sustainably over the medium term. The IMF also believes that Japan's fiscal policy should be focused on "growth-friendly" fiscal consolidation to help rebuild buffers and ensure debt sustainability.