Buenos Aires, Feb. 18 (NA)—The International Monetary Fund (IMF) warned that Japan should continue to tighten its monetary policy and avoid reducing the consumption tax, according to information from Xinhua accessed by the Argentine News Agency. The IMF declared, after concluding regular consultations with Japanese authorities, that the Bank of Japan is “appropriately withdrawing its expansionary monetary policy” and should continue to gradually raise interest rates so that the policy rate reaches a neutral level, neither stimulating nor restraining the economy, by 2027. The International Monetary Fund stated that the “continuing independence and credibility” of the Japanese central bank will help keep inflation expectations well anchored, warning the government not to interfere too much in monetary policy. The IMF contradicted Takaichi. This latest warning came when Prime Minister Sanae Takaichi intended to suspend the 8% tax on food and beverages for two years after the general elections at the beginning of this month, presenting the measure as necessary support for households. “Support to the most vulnerable households and businesses most affected by the increase in the cost of living or large external disturbances must be neutral from a budgetary point of view, temporary, and targeted to these groups,” declared the IMF. The financial body warned that reducing the consumption tax in Japan would “erode the fiscal margin and increase fiscal risks,” and that a “non-targeted” measure to address the increase in the cost of living could further deteriorate the country's fiscal health. The International Monetary Fund warned that Japan's public debt, the highest among major economies, is projected to increase in the long term, although spending constraints and higher tax revenues have had positive effects on its post-pandemic fiscal consolidation efforts. The Washington-based organization analyzed multiple dimensions of the Japanese economy, not just its fiscal situation, and noted that the risks to economic prospects are “downward.” “At the national level, the main risk remains weak consumption if real wage growth does not become positive,” it stated.
