IMF urges BOJ to avoid premature monetary easing exit FMTNews FMTBusiness
Despite a tighter labour market, base wage growth is expected to rise in 2023 but remain below the BOJ’s 2% inflation target.
“Any changes to monetary policy settings will need to be well communicated to facilitate smoother transitions and protect financial stability,” the fund said Friday at the conclusion of its latest Article IV policy report on Japan. Abrupt policy framework change would impose risks on the economy, it said.
The IMF said it expected inflation to peak in the first quarter of this year and fall below the BOJ’s 2% target by the end of 2024. The continued monetary easing was needed to keep inflation anchored above the goal, it said, adding that a recent rise in workers’ salaries was probably not enough. Wage growth of 3% is considered necessary to achieve sustainable 2% inflation. While the latest results from annual union talks suggest a 3.8% gain in overall wages this year, base wages, which have a greater impact on helping households counter inflation, are seen rising only 2.3%.
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