TOKYO, June 8, 2011 (AFP) - The International Monetary Fund on Wednesday lowered its 2011 growth forecast for Japan and called on the world's third largest economy to adopt "more ambitious" measures to tackle its huge debt.
The IMF cut its growth forecast for Japan in 2011 to minus 0.7 percent from the plus 1.4 percent it had predicted in April after the country was hit by its biggest recorded earthquake.
It said it expected GDP growth to rise to 2.9 percent in 2012.
"Japan's economy continues to face headwinds from the earthquake but should start to recover strongly in the second half of the year," the IMF said in a statement.
"The initial shock of the disaster was severe, but swift and decisive action by the government and the Bank of Japan helped to limit its impact on the economy," it said.
The fund said Japan needed to implement a more ambitious medium-term plan to lower the industrialised world's biggest public debt through higher taxes in order to maintain investor confidence.
"Given the limited scope for cutting expenditures, the fiscal adjustment strategy should rely on comprehensive tax reforms centered on a gradual increase in the consumption tax."
The fund said comprehensive fiscal and structural reforms in Japan "would also benefit the rest of the world" in terms of better stability in government bond markets and helping reduce global interest rates.