TechFlow News, April 4: Despite the Middle East conflict posing a “significant new risk” to Japan’s economic outlook, the International Monetary Fund (IMF) has urged the Bank of Japan (BOJ) to continue raising interest rates. This recommendation comes amid broad market expectations that the BOJ could raise rates as early as April. Inflationary pressures are intensifying due to rising oil prices driven by the conflict and higher import costs stemming from yen depreciation.
In its statement, the IMF noted that although economic growth is expected to moderate—partly due to the Iran conflict—modest wage growth will support consumption. Risks to Japan’s economic outlook and inflation are broadly balanced, and inflation is projected to return to the BOJ’s 2% target by 2027. As underlying inflation gradually converges toward the BOJ’s target, monetary policy should continue raising rates gradually, flexibly, transparently, and in a data-dependent manner, moving toward a neutral interest rate level. The IMF also emphasized that maintaining a flexible exchange rate regime is critical, as it serves as a reliable buffer against external shocks. (Jinshi)
