Originally written by:LEIKA KIHARA
Original News source link: https://www.japantimes.co.jp/business/2026/04/04/economy/imf-boj-raise-rates/
The International Monetary Fund has called on the Bank of Japan to continue raising interest rates, despite growing concerns over global instability triggered by the ongoing conflict in the Middle East.
In its latest assessment, the IMF acknowledged that while Japan’s economy has shown signs of gradual recovery, new geopolitical tensions are creating “significant risks” to its economic outlook. Rising energy prices, disrupted supply chains, and uncertainty in global markets are among the key challenges highlighted.
Japan, which has long maintained ultra-low interest rates to combat deflation and stimulate growth, is now at a critical turning point. The IMF believes that a steady normalization of monetary policy is necessary to ensure long-term economic stability, particularly as inflation begins to show upward momentum.
However, the situation is far from straightforward. The conflict in the Middle East has introduced fresh volatility into global markets, potentially impacting Japan’s export-driven economy. Higher oil prices could increase import costs, putting pressure on businesses and households alike.
Despite these risks, the IMF emphasized that delaying rate hikes could create imbalances in the financial system. Gradual increases, it suggests, would help Japan strike a balance between supporting growth and controlling inflation.
The Bank of Japan now faces a delicate policy decision whether to stay the course on tightening or proceed more cautiously in light of global uncertainties. As the situation evolves, its approach will play a crucial role in shaping Japan’s economic trajectory in the months ahead.
