(Bloomberg) -- The Bank of Japan is on track to fully realize its sustainable price target over the next two years enabling it to raise interest rates further, according to the International Monetary Fund’s mission chief for the nation. 

Strong wage growth in Japan is expected to feed into consumption in the second half of this year and with growing price expectations this will likely put the BOJ in a position to conduct its next interest rate hike, IMF mission chief to Japan Nada Choueiri said Wednesday in an interview on the sidelines of the IMF spring meetings in Washington. 

She didn’t elaborate on the specific timing of the next increase.  

The IMF sees green shoots of demand-driven inflation and changes in people’s perceptions, Choueiri said. She expects Japan’s price growth to stay above the BOJ’s 2% target in 2024 and 2025, and should those forecasts materialize, price growth will have become sustainable, meeting the bank’s goal. 

“We expect it to be achieved,” she said. “The usual consumer mindset for somebody who lives with inflation is starting to appear in the Japanese economy.” 

Choueiri took her current position in March before the BOJ raised interest rates for the first time in 17 years and scrapped its massive stimulus program while keeping its overall policy settings accommodative — all in line with recommendations the fund made in February. 

“That advice was taken pretty seriously,” she said. “It was the right move to make at the right time and it was very well prepared and very well executed.”

The BOJ’s decision last year to ease its grip on long-term bond yields also came after IMF policy suggestions along the same lines, causing market participants to pay more attention to the fund’s recommendations. 

The BOJ is set to wrap its two-day policy meeting on April 26 in which it’s scheduled to upgrade its price and growth forecasts. Currently, the BOJ forecasts core inflation to fall back below 2% in the year starting April 2025.  

Choueiri said it’s still premature to consider what the terminal rate for the current hiking cycle will be or when the BOJ should stop its purchases of Japanese government bonds. 

“The need to wind down the balance sheet is not something for the near term,” she said. “The policy of the BOJ now is to maintain purchases at broadly the current level to maintain a stable balance sheet and intervene if needed to stabilize the bond number. And that should be the policy for the near term.”

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