IMF Urges Japan: Hike Rates, Shun Tax Cuts Amid Rising Debt Risks

• IMF advises Japan to continue gradual interest rate hikes until a neutral level is reached by 2027.
• Warns against consumption tax cuts, citing erosion of fiscal buffers and mounting debt pressures.
• Japan's public debt remains highest among major economies, with interest payments projected to double by 2031.
• BOJ's policy rate expected to reach 1.5% by 2027, with inflation converging towards the 2% target.
• Recommends growth-friendly fiscal adjustment from 2026, including rationalizing poorly targeted subsidies.