WASHINGTON ¨C A spokesperson at the International Monetary Fund on Thursday commended Japan¡¯s draft supplementary budget for fiscal 2025.

¡°We are encouraged to see that some of the more fiscally burdensome proposals that had been discussed¡± are not included in the extra budget plan, Julie Kozack said at a regular news conference.

Japan¡¯s key long-term interest rate, measured by the yield on the most recent issue of 10-year Japanese government bonds, is going up due to concerns among financial market players over the country¡¯s fiscal health following the compilation of the draft add-on budget by the administration of Prime Minister Sanae Takaichi last month.

Kozack, however, said the IMF thinks that the overall size of the draft budget is ¡°smaller than what market analysts had been expecting.¡± Therefore, the organization believes that ¡°the impact of the fiscal package on next year¡¯s fiscal deficit will be a bit smaller than the announced size,¡± she added.

Backed by strong economic growth, the ratio of Japan¡¯s debt to its gross domestic product ¡°will be on a declining path next year,¡± Kozack said.

At the same time, she warned that ¡°Japan does face some longer-term spending pressures,¡± including from higher interest rates, the aging of society and the country¡¯s plan to strengthen its defense capabilities.

Kozack noted that the Bank of Japan¡¯s monetary policy ¡°does still remain appropriately accommodative,¡± indicating that the central bank has room for raising its policy interest rate.

Still, she said the BOJ needs to ¡°continue its flexible and data-dependent approach,¡± noting that Japan, like many other countries, remains in an environment of ¡°high uncertainty.¡±

BOJ Gov. Kazuo Ueda has said the central bank will decide appropriately whether to raise interest rates at its next monetary policy meeting on Dec. 18 and 19.