IMF urges BOJ to keep raising rates even as Iran war poses new risks

The International Monetary Fund urged the Bank of Japan to continue raising interest rates, even as the Middle East war posed "significant new risks" to the country's economic outlook.



The proposal comes amid market expectations the BOJ will raise interest rates as soon as April in the face of mounting inflationary pressure from the conflict-induced spike in oil prices, and higher import costs blamed on the weak yen.



While growth is expected to moderate, due partly to the Iran war, gradual wage gains will underpin consumption, the IMF said in a statement issued from Washington on Friday after the conclusion of its policy consultation with Japan.



"Risks to the outlook and inflation are broadly balanced" with inflation expected to converge to the BOJ's 2% target in 2027, the IMF said.



In the statement, the IMF said its executive board commended Japan's "strong economic resilience" to global shocks and agreed the BOJ was appropriately withdrawing monetary accommodation.