The IMF said it expects the Bank of Japan to deliver one more rate increase to
move policy closer to neutral, but that subsequent adjustments should remain
flexible amid rising global uncertainty. IMF staff estimate Japan’s neutral rate
at 1.1–2.2% (midpoint ~1.5%); the BOJ’s current policy rate of 1.25% is within
that range. The IMF warned that sustained high energy prices and greater
corporate pass-through of costs will keep upward pressure on inflation, which it
expects to rise above 2% and then gradually return toward that level by
end-2027.
