IMF calls for end to Japan monetary easing framework and consideration of interest rate hikes – Reuters

The International Monetary Fund (IMF) issued a statement on the 9th at the end of its review of the Japanese economy (Article IV consultations on Japan), calling on the Bank of Japan to abolish the current monetary easing framework and consider raising short-term interest rates in stages. proposed that it should be done. Photographed in January in front of the Bank of Japan in Tokyo (2024 Reuters/Kim Kyung-Hoon)

TOKYO (Reuters) – The International Monetary Fund (IMF) issued a statement on the 9th at the end of its review of the Japanese economy (Article IV consultations on Japan), urging the Bank of Japan to abolish the current framework for monetary easing measures and short-term He suggested that a gradual increase in interest rates should be considered.

The IMF states that the risk of upward inflation in Japan has become apparent over the past year due to rising nominal wages and the closing of the output gap, and the Bank of Japan has abolished long-term and short-term interest rate control (yield curve control, YCC) and It clearly stated that qualitative monetary easing should be ended and a gradual increase in short-term policy interest rates should be considered.

The reasons include, “The Bank of Japan’s current monetary easing achieves its original purpose of lowering interest rates below the neutral rate (which neither accelerates nor decelerates the economy) and raises inflation expectations.” Eliminating the mitigation framework will simplify communication.”

At the same time, he also pointed out that it is possible to reinvest the Bank of Japan’s government bonds that are about to mature in order to avoid a sharp rise in interest rates in the bond market.

It also states that if the IMF’s price projections become reality, policy interest rates should be raised gradually over a three-year period.

On the fiscal front, it advocates unifying and raising the consumption tax rate, strengthening financial income taxation for high-income earners, abolishing preferential treatment for residential land, streamlining deductions for personal income taxation, and increasing social insurance premiums.

It also points out that in order to curb medical costs, it is necessary to raise co-payments for high-income seniors and promote the use of generic drugs.

Speaking at the press conference, Gita Gopinath, first deputy managing director, said that it would be desirable to change the Bank of Japan’s policy before the end of the year, but that it would depend on data such as wage trends in March. She said there was uncertainty about the Bank of Japan’s future interest rate hikes.

Ranil Salgado, head of the Japan panel, pointed out, “Although there is a difference in the amount of wage increases between large companies and small and medium-sized companies, Japan’s labor market is extremely tight.”

Regarding risks to the domestic and overseas economies, Gopinath cited the possibility that the deterioration of the US commercial real estate market would have a major impact on the US financial market. He expressed the view that as long as the Gaza conflict remains within the Middle East, the impact on global commodity prices and the economy will be limited.

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2024-02-09 05:49:24
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