The International Monetary Fund on Monday urged the government to go ahead with the consumption tax hike next April as planned, saying it is "an essential first step to contain fiscal vulnerabilities."

In its annual report on the Japanese economy, the IMF said that "the scheduled tax increases in April 2014 and October 2015 should proceed as planned as they are critical to maintain confidence in the ability of the government to address the fiscal problem."

The Abe administration plans to make a final decision this fall on the tax hike. Some economists have proposed delaying the increase out of concern it could weigh on the bid to reinflate the economy.