WASHINGTON – The International Monetary Fund cut its annual growth forecast for Japan on Tuesday, singling out the country as the only major advanced economy to have its growth projections cut. Fallout from the April 1 consumption tax hike was cited as the reason for the revision.
In its World Economic Outlook report, the Washington-based organization also pared down its global economic growth estimate for 2014 by 0.1 percentage point to 3.6 percent amid ongoing instability in emerging market economies and deflationary risks in Europe.
The IMF reduced its growth projection for inflation-adjusted gross domestic product in Japan in 2014 to 1.4 percent from the 1.7 percent estimated in January.
It said the nation’s overall economic activity “is projected to slow moderately in response to a tightening fiscal policy stance in 2014-15” as a result of a two-step doubling of the consumption tax.
On April 1, the government of Prime Minister Shinzo Abe increased the sales tax to 8 percent from 5 percent and plans to raise it to 10 percent in October 2015.
The IMF urged Tokyo to take steps to achieve its 2 percent inflation target and higher sustained growth under its “Abenomics” policies, especially the structural reforms needed to boost growth.