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In the absence of the appropriate monetary stimulus, reforms fuel expectations of prolonged deflation, increase the real interest rate, and depress aggregate demand.
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The current high inflation rates are driven by transitory factors, it said, "and hence maintaining the current scale of monetary stimulus is appropriate given fiscal adjustment and subdued wage growth".
While the I.M.F. says it believes it is appropriate for advanced nations to keep up monetary stimulus for now — while inflation remains low and unemployment high — it is also urging policy makers to start thinking about the consequences of ending ultra-loose policies.
The squeeze on households and a strengthening economy mean "some withdrawal of monetary stimulus was likely to be appropriate over the coming months", the Bank said.
"The need for such extraordinary policy is now passing, and it is appropriate to begin to lessen the degree of monetary stimulus," it said.
MONETARY stimulus gets you only so far.
When Is a Monetary "Stimulus" Not a Stimulus?
There is now plenty of monetary stimulus.
The final facet of Abenomics is its monetary policy, which reinforces stimulus with monetary stimulus.
Others will continue to recommend even more monetary stimulus or fiscal stimulus, or both.
Monetary policy has been operating near the zero lower bound to provide maximum monetary stimulus.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com