The Bank of Japan can raise interest rates gradually as heightening inflation expectations leave further scope to normalize its ultraloose monetary policy, the International Monetary Fund said on Friday.
The speed of further rate increases will be "very data-dependent," as the BOJ will look at the pace at which inflation, wage growth and inflation expectations heighten in normalizing policy, said IMF chief economist Pierre-Olivier Gourinchas.
Gourinchas said Japan's inflation is higher than 2% and inflation expectations have started to move toward, or "maybe even a little bit above" the BOJ's 2% target.