WASHINGTON - The International Monetary Fund on Tuesday cut its growth projection for Japan this year, singling out the country as the only major advanced economy to experience a downward revision, citing the fallout from the April 1 consumption tax hike.
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 the instability in emerging market economies and deflationary risks in Europe.
On Japan, the IMF reduced its growth projection for 2014 to 1.4 percent from 1.7 percent estimated in January in terms of inflation-adjusted gross domestic product.
It said Japan'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 rate.
On April 1, the government of Japanese Prime Minister Shinzo Abe increased the consumption tax rate to 8 percent from 5 percent and plans to raise it further 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" economic policies, especially structural reforms to boost its potential growth.
Olivier Blanchard, chief economist at the IMF, told a press conference, "In Japan...fiscal stimulus has played a large role and the strength of the recovery depends in large part on whether private domestic demand and exports will take the relay."
The IMF kept Japan's growth estimate for 2015 at 1.0 percent, unchanged from the January report.
As for advanced economies as a whole, the IMF kept its overall estimate unchanged at 2.2 percent. "In advanced economies, major concerns include downside risks from low inflation and the possibility of protracted low growth, especially in the euro area and Japan," the report said.
The IMF said a key driver of the growth of advanced economies other than Japan is "a reduction in fiscal tightening."
The growth estimate for the eurozone for 2014 was revised upward by 0.1 point to 1.2 percent and that for the United States was unrevised at 2.8 percent.
The IMF revised downward its growth projection for overall emerging economies for this year by 0.2 point to 4.9 percent, saying tighter financial conditions will dampen domestic demand growth.
The Chinese economy will expand 7.5 percent this year, unrevised from the previous projection, the report said.