IMF Vice President: Japan's economy is experiencing a long-term structural recovery, supporting the Bank of Japan in continuing to advance the normalization of monetary policy.

Dan Katz, First Deputy Managing Director of the International Monetary Fund (IMF), stated that the Japanese economy is undergoing a profound and long-term transformation, and the economic recovery provides space for the Bank of Japan to continue its normalization of monetary policy. In the context of inflation remaining slightly above the 2% target, he expects the Bank of Japan to gradually exit its ultra-loose monetary policy that has lasted nearly 30 years. In an interview on Thursday, Katz noted that the economic improvements in Japan in recent years are not a short-term phenomenon but rather a gradual realization of the structural reforms initiated during the tenure of former Prime Minister Shinzo Abe. He indicated that the Bank of Japan has begun to move away from the ultra-low interest rate policy implemented for nearly three decades and is progressively advancing the normalization of monetary policy. Katz remarked, The Japanese economy is undergoing a very important long-term transformation, and the Bank of Japan has started to exit the ultra-low interest rate era that has lasted nearly 30 years and is pushing for policy normalization. The official, who previously served as Chief of Staff at the U.S. Department of the Treasury and joined the IMF last year, stated that the Bank of Japan will continue to formulate policies based on its statutory responsibilities, ensuring support for economic growth while achieving its inflation targets. Katz pointed out that Japan's current inflation is still slightly above the Bank of Japan's 2% target, hence he anticipates that the normalization of monetary policy will continue. He said, Inflation is currently still slightly above the target, so I expect the Bank of Japan to continue advancing policy normalization. When discussing how to support the yen's exchange rate, Katz stated that the Bank of Japan should continue to take measures that align with its policy goals, maintaining a balance between stabilizing prices and supporting the economy. Last week, the U.S. and Japan conducted their first joint intervention in the yen exchange rate in 15 years. Following this, U.S. Treasury Secretary Janet Yellen stated that the U.S. would not rule out further actions to support the yen if necessary. However, Yellen also emphasized that market interventions are merely one part of addressing the long-term undervaluation of the yen, and improvements in the exchange rate still require deeper economic and policy adjustments. As of Thursday evening Beijing time, the yen was trading at 158.18 against the U.S. dollar, down about 1.3% from the peak on August 3. Regarding the global economy, Katz believes that despite ongoing geopolitical conflicts and supply chain challenges, the global economy is showing unexpected resilience overall. He noted that new technologies such as artificial intelligence (AI) are becoming a significant force driving global economic growth, with large-scale investments focused on AI continually propelling global economic activity. Katz pointed out that there is currently a surge of financial innovation globally, with new technologies and business models emerging continuously, particularly in regions like Africa, where innovations like mobile payments are creating more value for consumers and businesses. However, Katz also warned that the global economy still faces the risk of persistent international imbalances. He stated that unlike in the past, when countries frequently switched between trade surpluses and deficits, many countries today maintain substantial surpluses or deficits for extended periods. This type of sustained global imbalance could trigger significant adjustments in financial markets. Katz mentioned that the IMF will continue to provide policy advice to member countries, assisting them in optimizing domestic economic policies and international economic links, fostering a more balanced and sustainable growth for the global economy.