The International Monetary Fund on Tuesday upwardly revised its economic forecast for Japan and said it could tolerate a weaker yen against the dollar to help Japan fight deflation.
In its World Economic Outlook report, the IMF said it expects Japan's gross domestic product to contract 0.4 percent in real terms in 2001, compared with its November projection of a 0.9 percent shrinkage.
The IMF also revised its 2002 GDP projection to a 1 percent contraction from the 1.3 percent decline it predicted last month.
The IMF asked Japan for "a more ambitious monetary policy response" to offset the negative impact of structural reforms and to counter deflationary pressure.