The International Monetary Fund has 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 51³Ô¹ÏÍø, 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.

¡°They noted that ?as underlying inflation converges toward the BOJ¡¯s target, gradual rate ?hikes toward neutral should continue¡± in a flexible, well-communicated and data-dependent approach, the statement ?said.

¡°Directors ?stressed the importance of maintaining a flexible exchange rate as a credible shock absorber,¡± it added.

The BOJ ended a massive stimulus in 2024 and raised interest rates several times, including in December, on the view that Japan was on the cusp ?of durably hitting its 2% inflation target.

The central bank has stressed its readiness to keep raising rates on the expectation that underlying inflation will converge to its 2% target sometime from the second half of fiscal 2026 into fiscal 2027. Japan¡¯s fiscal year starts in April.

While rising oil ?prices hurt ?Japan¡¯s import-reliant economy, BOJ policymakers have signalled their concern they will add ?to inflationary pressures from years of steady wage gains and broader price increases.

The BOJ¡¯s slew of ?hawkish communication has prodded markets to price in a roughly 70% chance of a rate hike in April.

The yen¡¯s slide toward the key ?160 level has also kept markets on alert for the chance of currency intervention by Japanese authorities.

Finance Minister ?Satsuki Katayama issued a fresh warning against yen bears on Friday, saying Japan stood ready to act against speculative moves in the currency market.

¡°We¡¯re ready to take all available means that are legally feasible, be it conventional or non-conventional,¡± she told an online program on Friday evening.

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