## Transcript of Press Briefing on Japan Article IV

_IMF News, February 9, 2024_

## Source details

**Canonical URL:** [Transcript of Press Briefing on Japan Article IV](https://www.imf.org/en/news/articles/2024/02/09/tr020924-transcript-of-press-briefing-on-japan-article-iv)

## Other formats

- [Markdown version](/en/news/articles/2024/02/09/tr020924-transcript-of-press-briefing-on-japan-article-iv/index.md)
- [Structured JSON version](/en/news/articles/2024/02/09/tr020924-transcript-of-press-briefing-on-japan-article-iv/index.json)
- [Bundle manifest](/en/news/articles/2024/02/09/tr020924-transcript-of-press-briefing-on-japan-article-iv/bundle-manifest.json)

## Bibliographic details
- Published: February 9, 2024

---

### Economic outlook
- Output gap closed in mid-2023.
- IMF projects 1% growth in 2024.
- IMF reported 1.9% growth for Japan in the prior year.
- Medium-term projection for growth in Japan: 0.4%.
- For the first time in three decades, price increases are broad-based across goods and services.
- Wages are growing at their fastest pace since 1995.
- Most households and firms now expect inflation to remain above 2% going forward.
- IMF expects core inflation to remain above the 2% target until the second half of 2025.
- Yen depreciation of about 9% last year contributed to Japan's nominal GDP in dollars slipping below Germany.

### Monetary policy (IMF assessment and advice)
- Unconventional monetary policies have supported recovery and raised inflation expectations but are assessed as no longer needed to achieve the inflation target.
- IMF view: Bank of Japan (BOJ) should:
  - Exit from yield curve control (YCC) and end the quantitative and qualitative easing (QQE) framework.
  - Continue to roll over maturing JGBs to avoid abrupt shifts in bond markets.
  - Gradually raise the policy interest rate over the next few years.
  - Implement policy shifts gradually and with clear communication.
- IMF emphasizes continued caution due to mixed incoming data and remaining downside risks to inflation.
- IMF will monitor March wage data and subsequent data rounds to guide timing; did not specify a terminal short-term policy rate.

### Fiscal policy (IMF assessment and advice)
- Output gap closed and public debt to GDP already very high at around 250% of GDP.
- IMF recommends meaningfully tighter fiscal policy now.
- Fiscal consolidation needed to rebuild fiscal buffers and ensure debt sustainability.
- Revenue-side options include strengthening financial income taxation for high income earners.
- Expenditure-side measures include limiting untargeted transfers or phasing out energy subsidies.
- Additional expenditure policies should be offset by higher sustainable revenues.

### Financial sector resilience and risks
- IMF conducted an in-depth assessment as part of the Financial Sector Assessment Program (FSAP).
- Stress tests suggest the financial system is broadly resilient to a range of macrofinancial shocks (including rises in foreign and domestic interest rates and sharp drops in global and domestic growth).
- Identified vulnerabilities include:
  - Sizable securities holdings.
  - Foreign currency exposures.
  - Signs of overheating in parts of the real estate market.
- IMF view: System-wide capital and liquidity buffers are strong, but vigilant monitoring and strengthened oversight and crisis preparedness frameworks are needed.
- Direct spillovers from U.S. commercial real estate to Japanese banks assessed as limited given current exposures; larger global financial turmoil could produce substantial indirect spillovers.

### Structural reforms and labor market
- Structural reforms recommended to raise medium-term growth and make the economy more dynamic, green, and inclusive.
- Priority measures to increase labor market dynamism and participation:
  - Empower women in the labor market by expanding childcare facilities (notably for children under the age of two).
  - Reform workplace practices to allow more flexible work models (including teleworking).
  - Move away from lifetime employment to facilitate worker reallocation and boost entrepreneurship and startups.
  - Consider further increases in foreign workers as part of the policy mix.
- IMF notes Japan has raised labor force participation, but much of the increase has been in non-regular employment; female leadership remains very limited.

### Capital markets and investor considerations
- Japanese equities have reached multi-decade highs; Nikkei 225 increased by nearly 40% since January 2023.
- Factors behind equity strength cited: strong corporate earnings, weak yen, broad-based inflation, and corporate governance reforms by Japan Exchange Group.

### Selected Q&A highlights (policy timing, risks, and external factors)
- Timing of BOJ policy normalization:
  - IMF supports a gradual, data-driven approach; March wage data seen as an important near-term indicator.
  - IMF does not set a specific date or terminal rate.
- On risks of being “behind the curve”: IMF judges the BOJ’s gradual, accommodative approach appropriate and does not see a high risk of being behind the curve based on current data.
- On Japan’s GDP ranking and per capita GDP:
  - Nominal GDP in dollars slipped below Germany mainly due to yen depreciation of about 9%.
  - IMF uses purchasing power parity-based exchange rates for world growth comparisons, where Japan remains higher than Germany.
  - Raising medium-term growth requires structural reforms described above.
- On population decline and labor shortages:
  - Declining population trend has already affected Japan; overall labor force has not yet fallen thanks to increased participation.
  - Solutions include productivity-enhancing reforms, greater labor market flexibility, and consideration of increased foreign workers.
- On global geopolitical risks (Gaza and Ukraine) and commodity markets:
  - If conflicts remain contained regionally, spillovers to the global economy should be limited; larger escalation would raise risks and commodity price pressures.
- On fiscal trust and JGBs:
  - IMF does not see an immediate loss of trust in JGBs given low borrowing rates and large domestic demand for JGBs, but stresses the need for consolidation to address long-term debt dynamics and rising future spending needs (defense, green and digital transitions).

*Transcript of Press Briefing on Japan Article IV — February 9, 2024. IMFC Communications Department.*

---


## References

- [Gita Gopinath](https://www.imf.org/en/about/senior-officials/bios/shirin-hamid)
- [Opening Remarks by First Deputy Managing Director Gita Gopinath at the Press Conference on the Conclusion of the 2024 Japan Article IV Consultation Mission](https://www.imf.org/en/News/Articles/2024/02/08/sp020924-remarks-by-fdmd-japan-a4-mission-concluding-presser)
- [Japan: Staff Concluding Statement of the 2024 Article IV Mission](https://www.imf.org/en/News/Articles/2024/02/08/mcs020824-japan-staff-concluding-statement-of-the-2024-article-iv-mission)
- [Germany and the IMF](http://www.imf.org/external/country/DEU/index.htm)
- [Japan and the IMF](http://www.imf.org/external/country/JPN/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Transcripts](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2024/02/09/tr020924-transcript-of-press-briefing-on-japan-article-iv_