A senior International Monetary Fund official has advised Japan to gradually raise interest rates while keeping any fiscal stimulus narrowly targeted, citing robust domestic demand and steady wage gains, Reuters News reported on Friday.

Krishna Srinivasan, director of the IMF's Asia Pacific Department, stated at a news conference that Japan's growth has remained resilient, with strong domestic demand and positive wage growth, the news wire said.

Srinivasan recommended that the Bank of Japan adopt a data-dependent approach to gradual rate hikes, projecting inflation will reach the BOJ's 2% target by 2027, the publication said.

On fiscal policy, Srinivasan urged Japan to use its fiscal buffers wisely and provide targeted support, noting that current fuel and utility subsidies are adding to the country's already substantial debt, the report said.

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