Leika Kihara
Tokyo (Reuters) – Japan should be warned for all effects of crossing a growing volatility in a foreign market that could influence liquidity for financial institutions, an international monetary fund announced on Friday.
The IMF also said that the country was supposed to be awake in the monitoring of any fall from the interest rate of the Japan bank, such as increasing the cost of the government of debt service and the possible jump of corporate bankruptcy.
“As interest rates are growing, it is expected that the cost of servicing a large public debt will be doubled by 2030, putting a premium on a strong debt management strategy,” the statement published after consulting Japanese policy creators.
“On the eve of the growing needs for gross funding and reducing the Boy Balance, the issuance of government bonds will have to rely on the additional demand of foreign investors and domestic institutions,” the statement said.
Jen made significant swings compared to the dollar, mostly guided by shifts in interest rates in Japan and the USA, but also with increased accumulation and unwinding of Yen dealers, IMF said.
The growth of foreign market volatility could affect domestic liquidity conditions, which could trigger the effects of pouring out, IMF said.
“To alleviate these risks, the central bank should closely monitor the conditions of liquidity and financing rates in the monetary markets, at the same time paying special attention to the uneven distribution of liquidity between banks,” it was said.
The IMF welcomed the Japanese “permanent commitment to the flexible course regime”, saying that it should continue to help the country to absorb external shocks and support the focus of its monetary policy on prices stability.
The battle ended last year for ten years, the radical stimuli program and increased short -term interest rates to 0.5% from 0.25% in January, which reflected his growing belief that Japan for a duration to maintain his goal of inflation of 2% .
After three decades of inflation almost zero, there are signs that the Japanese economy can be sustainable to converge into a “new balance” with inflation that exceeds the target battle of 2% over two years, and the narrow labor market increases salaries, says IMF.
The IMF has called for a gradual increase in Boj policy rates, saying that the ultra-low interest rates of Japan could enable companies with low productivity companies to survive longer than would otherwise delay and delay the necessary economic restructuring.
But it warned that the interest rate faster than the expected increases with growing bankruptcy among smaller companies can destabilize the banking sector.
