The International Monetary Fund cut Japan's economic growth forecast on Thursday and urged policymakers to consider preparing a contingency plan in case the Ukraine crisis derails a fragile recovery.
While rising commodity costs could push up inflation, the Bank of Japan must maintain ultraeasy policy for a prolonged period to sustainably hit its 2% inflation target, the IMF said in a staff report after its Article 4 policy consultation with Japan.
"Escalation of the Ukraine conflict poses significant downside risks to the Japanese economy," the IMF said, pointing to the potential hit to trade and noting that rising commodity prices could stifle domestic demand.
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