The International Monetary Fund on Tuesday slashed its projection for Japan’s economic growth by the most of any developed country, while also cutting its growth estimate for the global economy citing increasing geopolitical tensions.
The IMF said in its semiannual World Economic Outlook report that Japan will grow a real — or inflation-adjusted — 0.9 percent this year, down 0.7 percentage point from its estimate in July, citing the protracted impact of the April consumption tax rate hike.
“In Japan, the decline in domestic demand following the increase in the consumption tax was larger than expected,” the Washington-based lender said.
In April, Japan raised the sales tax to 8 percent from 5 percent.
The IMF, which also trimmed its growth forecast for Japan in 2015 to 0.8 percent from its earlier estimate of 1.0 percent, hoped private investment would rebound in the second half of 2014 and repeated its call on the debt-ridden country to implement structural reforms to ensure economic expansion.
“Japan has to achieve stronger private demand,” Olivier Blanchard, IMF chief economist, told a press conference at IMF headquarters, warning the potential growth in Japan is “very, very low.”