Labeling genres is often a tricky task, but I can say I don't like most works that have been dubbed "literary fiction". I find them to be usually quite mundane, and as a sci-fi/fantasy writer and reader, I like my stories with a bit more imagination. For a while, I even considered literary fiction utterly boring.
But, some time ago while participating in an online writing community, I had the chance to review a young lady's piece of prose which I can only define as "literary". It seemed to serve no purpose other than to show off the power of words, and it floored me. It was beautiful - so beautiful that I didn't care that the vast majority of it was spent describing a single kiss. One moment, that we've all experienced, exposed in prose that made the act seem exotic and foreign.
So I can appreciate "literary fiction" as a genre, although I don't seek it out. But any genre can be "literary", depending on the author. I've seen a lot of agents and publishers requesting "exciting fantasy with elements of literary fiction", so there's plenty of room for crossover.
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