The IMF said in its World Economic Outlook that, despite an expected slowdown, the Bank of Japan is likely to gradually raise interest rates toward neutral, in line with other central banks facing inflationary pressure. It projects Japan’s GDP will slow from 1.2% last year to 0.7% in 2026 and remain at 0.7% in 2027, with fiscal support partly offsetting higher energy costs. The IMF warned only temporary shocks justify ignoring their direct and short-term inflationary effects, and that rising inf

The IMF said in its World Economic Outlook that, despite an expected slowdown, the Bank of Japan is likely to gradually raise interest rates toward neutral, in line with other central banks facing inflationary pressure. It projects Japan’s GDP will slow from 1.2% last year to 0.7% in 2026 and remain at 0.7% in 2027, with fiscal support partly offsetting higher energy costs. The IMF warned only temporary shocks justify ignoring their direct and short-term inflationary effects, and that rising inflation expectations could force central banks to raise nominal rates to keep real borrowing costs stable.