IMF chief Rato calls for deficit cuts

Rato met Japanese Prime Minister Junichiro Koizumi and Finance Minister Sadakazu Tanigaki on a two-day visit to Tokyo that ended Tuesday. He will also visit Beijing June 23-24, Singapore June 25 and Hanoi June 26.

"This clear moment of upswing is a very good moment to put forward reforms that could (support) the possibility of sustained growth ... and a reduction of public debt in ageing populations," Rato said.

When all trace of deflation has disappeared, the Bank of Japan should shift its ultra-loose monetary policy towards a more neutral stance, Rato said.

"But I think right now, the (bank's task) is to completely (end) all the deflationary pressures," he added.

"The world economy is seeing a change in monetary policy and already markets have factored it in," Rato said, referring to widely held views that the Federal Reserve will raise short-term interest rates soon.

"We think that monetary authorities and governments are vigilant regarding the (knock-on) effect, which could be damaging for the world economy," he said, while adding that there has been no clear sign of increasing pressure on prices.