Yen to strengthen, raises Japan GDP forecast: IMF

Washington, Aug 7: The yen should gain in value over time as Japan gradually lifts interest rates, the International Monetary Fund said today as it raised its forecast for the country's economic growth this year.

IMF ''directors felt that the yen could be expected to appreciate over time, supported by policy reforms to boost domestic demand,'' it said in a statement.

In a regular assessment of the country's economic health, the IMF raised its forecast for Japanese growth in 2007 to 2.6 per cent from the 2.3 per cent pace it had estimated in April, while judging inflation would stay flat.

The IMF also said Japanese monetary policy was still appropriately accommodative, given very muted inflation risks, but it expected interest rates would rise.

''With no signs of worrisome financial imbalances, a return to a neutral monetary stance should proceed in tandem with inflation prospects,'' it said.

Reuters>