The International Monetary Fund issued a triple warning to Japan.

The International Monetary Fund (IMF) released a report on February 17, warning the Japanese government to maintain the independence of the Bank of Japan (BOJ), control fiscal expansion, and avoid addressing livelihood issues by cutting the consumption tax. This report coincided with the Japanese prime ministerial election. The market is closely watching whether Sanae Takaichi will oppose further interest rate hikes by the BOJ, and her previous two-year commitment to "zero out the food consumption tax." Regarding monetary policy, the IMF pointed out that maintaining the BOJ's independence and credibility helps stabilize inflation expectations, and stated that the BOJ "should continue to exit monetary easing, bringing the policy rate to a neutral level by 2027." Regarding fiscal policy, the IMF believes that further easing is not advisable in the short term. This contradicts Takaichi's proposed "responsible and proactive fiscal policy." The IMF believes that while Japan currently has some fiscal space, it still needs to maintain fiscal restraint to solidify its fiscal buffer and maintain its ability to cope with shocks. The IMF predicts that in the long term, Japan's fiscal deficit will widen, spending pressure will increase, and total public debt will further grow. (Jinshi)