The International Monetary Fund issues a triple warning to Japan
According to Odaily, the International Monetary Fund (IMF) released a report on February 17, warning the Japanese government to maintain the independence of the Bank of Japan, control fiscal expansion, and avoid addressing livelihood issues by reducing the consumption tax. The release of this report coincides with the nomination election for Japan's Prime Minister. It is reported that the market is closely watching whether Sanae Takaichi will oppose further interest rate hikes by the central bank, as well as her previous pledge to implement a two-year “zero food consumption tax” policy. In terms of monetary policy, the IMF pointed out that maintaining the independence and credibility of the Bank of Japan helps stabilize inflation expectations, and stated that the Bank of Japan “should continue to exit monetary easing so that the policy rate reaches a neutral level by 2027.” Regarding fiscal policy, the IMF believes that fiscal policy should not be further loosened in the short term. This contrasts with Takaichi’s proposal of a “responsible proactive fiscal policy.” The IMF believes that although Japan currently has some fiscal space, it still needs to maintain fiscal restraint to strengthen fiscal buffers and preserve its ability to respond to shocks. The IMF predicts that, in the long term, Japan’s government fiscal deficit will expand, spending pressures will increase, and the total amount of public debt will further grow. (Golden Ten Data)
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