IMF Warns Japan of International Market Volatility Spillover Risks
The International Monetary Fund (IMF) has urged Japan to monitor external market volatility due to potential implications on domestic financial liquidity.
Risks Posed by Rising Interest Rates
The IMF also highlighted concerns regarding fallout from the Bank of Japan's interest rate hikes:
* Increased Debt Servicing Costs: Government debt servicing costs could double by 2030, emphasizing the need for a robust debt management strategy.
* Government Bond Market Challenges: Mounting gross financing needs and a shrinking BOJ balance sheet necessitate increased demand from foreign investors and domestic institutions.
* Increased Corporate Bankruptcies: Higher interest rates may lead to an increase in corporate failures, potentially destabilizing the banking sector.
Yen Volatility and Market Liquidity
Fluctuating yen-dollar exchange rates and carry trades have contributed to liquidity issues. The IMF recommends that the central bank closely monitor money market liquidity and funding rates, addressing uneven distribution among banks.
Flexible Exchange Rate Regime
The IMF supports Japan's flexible exchange rate regime, acknowledging its role in mitigating external shocks and fostering monetary policy objectives.
Fiscal and Monetary Policy Considerations
The IMF advocates for a постепенное increase in policy rates to avoid adverse effects from prolonged ultra-low rates on low-productivity firms and economic restructuring. However, it cautions that overly rapid rate increases and rising bankruptcies could destabilize the banking sector and disrupt the government bond market.