The International Monetary Fund has 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 said it now expected the Japanese economy to shrink by 0.7% this year. This compares with the 1.4% growth it had predicted in April after the country was hit by its biggest recorded earthquake. The IMF said it expected GDP to grow by 2.9% 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.
The IMF said comprehensive fiscal and structural reforms in Japan would also benefit the rest of the world by bringing better stability in government bond markets and helping to reduce global interest rates.
