China Trade Surplus Hits $125.6 Billion as June Exports, Imports Smash Forecasts 
Asian Stocks Rise as Softer U.S. Inflation Boosts Sentiment Despite Middle East Tensions 
South Korea’s KOSPI Enters Bear Market Despite Remaining 2026’s Best-Performing Major Stock Index 
Dollar Slides as Softer US Inflation Dims Fed Rate Hike Expectations 
Dollar Eases as Middle East Conflict, Fed Outlook and Japan Pension Policy Drive FX Markets 
South Korea Raises Interest Rates to 2.75% as Inflation and Weak Won Drive Tightening 
Oil Prices Climb as Trump Escalates Iran Pressure, Strait of Hormuz Risks Grow 
US Stock Futures Hold Steady as Soft Inflation Data Eases Fed Rate Hike Fears 
China Home Prices Fall Again in June Despite Slower Pace of Decline 
Gold Price Holds Near $4,000 as Middle East Tensions and Fed Rate Hike Bets Grow 
Dollar Holds Steady Ahead of U.S. CPI as Oil Surge, Middle East Tensions Keep Markets on Edge 
UBS Boosts China Tech Bets, Adds Kuaishou and Meituan to Focus List 
US Inflation Expected to Ease in June, but Fed Rate Hike Risks Persist Amid Middle East Tensions 
Australia Consumer Sentiment Rises in July as Fuel Price Relief Lifts Confidence 
ECB's Kocher Says No Inflation Spillover Yet From Iran Conflict, Warns Risks Remain 
Goldman Sees Foreign Investors Driving India Stock Market Recovery 
Asian Currencies Stay Rangebound as Middle East Tensions, Weak China GDP Weigh on Sentiment 
The International Monetary Fund (IMF) has urged Japan to continue raising interest rates and avoid further fiscal stimulus, warning that cutting the consumption tax could weaken the country’s ability to withstand future economic shocks. The recommendation comes as newly elected Prime Minister Sanae Takaichi’s decisive victory has intensified market focus on Japan’s monetary and fiscal policy direction.
Takaichi, widely seen as dovish, has pledged to suspend the 8% consumption tax on food for two years. However, the IMF cautioned that reducing the consumption tax would erode Japan’s fiscal space and increase fiscal risks at a time when the country faces mounting debt pressures. According to the IMF, near-term fiscal policy should refrain from further loosening and instead adopt a credible medium-term fiscal framework with a clearly defined fiscal anchor.
The IMF also emphasized the importance of the Bank of Japan’s independence, stating that its continued credibility is crucial to anchoring inflation expectations. With inflation exceeding the BOJ’s 2% target for nearly four years, the central bank has already exited its massive stimulus program in 2024 and raised its policy rate to 0.75%, a 30-year high, following multiple hikes including one in December.
The IMF said gradual interest rate hikes should continue, guiding the policy rate toward a neutral level by 2027 if economic projections remain on track. However, higher borrowing costs could complicate Takaichi’s tax cut and spending plans, which previously triggered volatility in Japan’s bond market and the yen.
Japan’s high and persistent public debt remains a key concern. Roughly a quarter of government spending is financed by debt, with about half held by the BOJ. As bond purchases are tapered and the central bank reduces its balance sheet, the IMF advised close monitoring of market liquidity. If volatility threatens stability, the BOJ should be ready to conduct targeted emergency bond-buying operations.
The IMF also welcomed Japan’s commitment to a flexible exchange rate regime, noting that yen flexibility helps absorb external shocks and supports price stability.
