TOKYO (Reuters) – The International Monetary Fund (IMF) warned on Thursday that the balance of risks facing Japan has tilted to the downside, citing uncertainty over the impact of a planned sales tax hike and global trade tensions.
Sharper-than-expected volatility in private consumption due to the planned tax hike next year could dent growth momentum, while weaker global demand and uncertainty over trade tensions could trigger yen spikes, hit stock markets and revive deflationary risks, the IMF said.
An accommodative monetary policy should be maintained in Japan, the IMF said in a statement after its “Article 4” annual consultations on economic policy with Japanese policymakers.
However, continued monetary accommodation could encourage financial institutions to engage in excessive risk taking, it said.
“Fiscal sustainability concerns and associated bond market stress could have adverse feedback effects on the financial system and the real economy,” it added.
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