An International Monetary Fund economist has urged Japan to start the process of fiscal consolidation as the normalization of its monetary policy is under way.

In Japan, "economic activity is running close to potential," Vitor Gaspar, director of the IMF's Fiscal Affairs Department, said in a recent interview.

The country's monetary policy is also "becoming more normal," with its inflation largely in line with the Bank of Japan's 2% target, Gaspar said.