The International Monetary Fund urged Japan on Wednesday to end deflation within 18 months with a more aggressive monetary policy and an injection of public funds into viable banks.
In its semiannual World Economic Outlook report, the IMF revised upward its estimate of economic growth in Japan to a contraction of 0.5 percent for 2002 from the 1 percent shrinkage projected in the previous report in April.
It predicted an expansion of 1.1 percent for 2003 from the earlier projected growth of 0.8 percent.
The Washington-based institution said however that Japan needs to fix its bad-loan problems and end deflation to ignite sustainable economic growth. It is vital for Japan to serve as an engine for the world economy amid growing concerns over the sustainability of the U.S.-led global recovery, it said.