FX.co ★ IMF Urges Caution on BoJ Rate Hikes

The Deputy Director of the IMF’s Asia and Pacific Department, Nada Choueiri, has recommended that the Bank of Japan maintain its accommodative monetary policy while incrementally raising interest rates due to ongoing global trade uncertainties. Choueiri highlighted that Japan's economic performance has surpassed expectations this year, supported by robust consumer spending and exports, alongside a recent trade agreement with the United States that has alleviated some uncertainties. Nonetheless, she cautioned that there are still significant downside risks, emanating from unresolved trade tensions between the U.S. and China and potential changes in global economic conditions. “Looking ahead, a gradual approach is crucial due to the prevailing uncertainties,” Choueiri stated in an interview with Reuters, emphasizing the importance of closely monitoring new economic data. Additionally, she expressed concerns that wage growth may not be sufficient to maintain inflation near the Bank of Japan's 2% target. The political landscape adds another layer of complexity, with instability stemming from leadership questions surrounding the newly appointed ruling party leader, Sanae Takaichi. The Bank of Japan’s forthcoming policy meeting is slated for October 29–30.