The Bank of Japan may start raising interest rates in 2024 if inflation remains above 2% and wage dynamics change, according to the OECD. The organization also recommended that the BOJ make its yield cap program more flexible and create a plan to restore Japan’s fiscal health. The OECD expects Japanese consumer prices to rise by 2% in 2024 and 2025. The BOJ is closely monitoring wage growth and is considering ending negative interest rates. The Prime Minister wants companies to increase wages to outpace inflation, although there is uncertainty about whether smaller firms will do so. The OECD suggested raising the 10-year yield cap and adopting a shorter-term yield target. The government is trying to reduce spending but still aims to achieve a primary budget surplus. The growing reliance on reserve funds for discretionary spending and the need for an external assessment of such spending was highlighted by the OECD. Additionally, links to related news articles about the Japanese economy are provided.

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