IMF Urges Japan to Keep Raising Rates and Avoid Tax Cuts

The International Monetary Fund (IMF) has advised Japan to continue raising interest rates and avoid reducing the consumption tax, warning that such a move would erode its capacity to respond to future economic shocks. This recommendation comes after Prime Minister Sanae Takaichi's landslide election win and her pledge to suspend the 8% consumption tax on food sales for two years. The IMF emphasizes that the Bank of Japan (BOJ) should maintain its independence and credibility to keep inflation expectations stable. With inflation exceeding the 2% target for nearly four years, the BOJ has signaled its readiness to keep hiking rates, currently at a 30-year high of 0.75%.