IMF Advises BOJ to End Monetary Easing, Gradually Increase Rates

The International Monetary Fund has recommended that the Bank of Japan cease its yield cap program and large-scale asset purchases, citing the country's improved inflation outlook.

• The IMF urges the Bank of Japan to end its yield cap program and other monetary easing measures, advocating for a gradual increase in interest rates.
• Japan's economy shows signs of recovery, with domestic demand driving inflation and a closing output gap.
• The IMF emphasizes the need for clear and effective communication from the BOJ during the policy shift to avoid market disruptions.
• Market players anticipate the BOJ to end negative interest rates possibly by April, reflecting confidence in Japan's inflation-adjusted borrowing costs.
• The IMF criticizes Japan's government for energy subsidies and untargeted income tax cuts, suggesting they could hinder economic recovery and decarbonization efforts.

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