INTERVIEW: IMF Asia-Pacific Chief Urges Japan to Start Debt Cuts

Tokyo, Nov. 2 (Jiji Press)--Krishna Srinivasan, director of the International Monetary Fund's Asia and Pacific Department, told Jiji Press that Japan needs to begin reducing high levels of debt under a detailed fiscal framework as the Bank of Japan's monetary policy is normalizing.

The ruling coalition's disastrous losses in Sunday's general election has led some to believe that the administration of Prime Minister Shigeru Ishiba will expand fiscal spending and promote tax cuts to support households suffering higher living costs.

During an interview with Jiji Press in Tokyo on Friday, however, Srinivasan highlighted the importance of embarking on "a phase of fiscal consolidation," citing the country's "very high" levels of public debt, which stand at more than 250 pct of its gross domestic product.

The leading IMF official called for Japan to "have a well fleshed-out, credible medium-term fiscal framework," while noting that "buffers" also need to be built "to address near-term risks and longer-term challenges."

On the BOJ's monetary policy, Srinivasan reiterated his view that the central bank should keep its focus on stabilizing inflation at its 2 pct target but said that any interest rate hike should be "gradual" and "data-driven." He noted that there are both "upside and downside risks of inflation."

[Copyright The Jiji Press, Ltd.]