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2026-02-18 16:02:15
[IMF Issues Three Warnings to Japan: Central Bank Independence, Fiscal Restraint, Consumption Tax Unchanged] ⑴ On February 17, the International Monetary Fund (IMF) released a report issuing three key policy warnings to the Japanese government: maintain the independence of the Bank of Japan, control fiscal expansion, and avoid addressing livelihood issues by cutting the consumption tax. The report's release coincided with the Japanese prime ministerial election, drawing significant market attention to the new government's policy direction. ⑵ Regarding monetary policy, the IMF emphasized that maintaining the Bank of Japan's independence and credibility helps stabilize inflation expectations. The institution explicitly stated that the Bank of Japan "should continue to exit monetary easing, bringing the policy rate to a neutral level by 2027." This stance contrasts with calls from some politicians to pause interest rate hikes. ⑶ On fiscal policy, the IMF believes further easing is inadvisable in the short term, contradicting the "responsible and proactive fiscal policy" concept proposed by Sanae Takaichi. The IMF pointed out that while Japan has some fiscal space, it still needs to exercise restraint to solidify its fiscal buffer and maintain its ability to cope with future shocks. In the long term, Japan's fiscal deficit will widen, and total public debt will further increase. (4) On livelihood policies, the IMF has explicitly opposed cutting the consumption tax. The market is closely watching whether Sanae Kashiwagi will push forward her previously proposed two-year "zero food consumption tax" commitment, and her stance on further interest rate hikes by the central bank.
