IMF Recommends Gradual Interest Rate Hikes by the Bank of Japan - Offers a More Moderate 'Remedy'

The International Monetary Fund (IMF) released the results of its regular consultations with the Japanese government on the 13th. The consultations mainly addressed the future direction of interest rate hikes by the Bank of Japan and the government's efforts to improve fiscal soundness.

The IMF suggested that the Bank of Japan should proceed with interest rate hikes at a 'gradual pace'. Recently, due to the rapid depreciation of the yen and upward pressure on prices, interest in the Bank of Japan's 'tightening moves' has been increasing in Japan. The IMF's suggestion is interpreted as an opinion that the Bank of Japan should be somewhat restrained.

Furthermore, the IMF emphasized that "fiscal soundness is necessary on both the revenue and expenditure sides" for the Japanese government. This appears to mean that efforts in both directions are required, including not only spending cuts but also expanding fiscal revenue through tax increases.

Meanwhile, the IMF maintained its previous forecast for Japan's economic growth rate at 0.9% this year and 1.0% next year. Regarding the overall economic recovery trend, it predicted that "consumption will recover from the latter half of 2024 to 2025 due to rising wages and a slowdown in inflation."

However, regarding Japan's persistent labor shortage, it expressed concern, calling it a "long-term challenge." This is interpreted as pointing out that issues such as rapid aging and population decline persist.

There are views that the IMF's suggestions may differ somewhat from the policy direction that Japan's financial authorities and government have been considering recently as a countermeasure against rising prices. In the market, the IMF's revised stance is interpreted as a more cautious 'remedial measure'.