WASHINGTON, Apr. 11, 2011 (Kyodo News International) -- The International Monetary Fund cut its growth forecast Monday for the Japanese economy to 1.4 percent for 2011, down from its previous 1.6 percent estimate in January, due to the expected negative impact of the March 11 earthquake and tsunami on the country's economic recovery.
Although the macroeconomic impact on the Japanese economy of the magnitude 9.0 quake which struck the country's northeast is projected to be limited, ''uncertainty remains elevated,'' the IMF said in its semiannual World Economic Outlook report, noting it is unclear how the ongoing nuclear crisis will affect the economy.
Touching on the Japanese government estimate that the damage from the March earthquake is likely to amount to 3 to 5 percent of the nation's real gross domestic product -- roughly twice that of the 1995 Great Hanshin Earthquake, the fund said the forecast did not include the effects of possible power shortages and ongoing risks associated with a crisis at Fukushima Daiichi nuclear plant.
The IMF's estimate that Japanese economic growth will slow to 1.4 percent this year from 3.9 percent in 2010 is seen as quite optimistic, as it is based on the assumption that the power shortages and the nuclear crisis will be resolved within a few months.
The Washington-based lender also anticipates the Japanese economy to expand 2.1 percent in 2012, up 0.3 percentage point from its January projection, on the country's rebuilding efforts in the aftermath of the disaster.
The IMF urged Tokyo to make efforts to ensure fiscal consolidation in the medium term once reconstruction work is on track.
''While the immediate concern in Japan should be to support reconstruction, measures that support a reduction of its high public debt ratio over the medium term need to be specified to maintain the strong confidence of its investor base,'' the report said.
Regarding the global economy, the IMF said, ''The recovery is gaining strength, but unemployment remains high in advanced economies.''
The fund also warned that ''new macroeconomic risks are building in emerging market economies'' and that overheating is a growing policy concern.
The IMF asked many emerging economies to tighten their monetary grip to rein in inflationary pressure.
''Rising food and commodity prices pose a threat to poor households, adding to social and economic tensions, notably in the Middle East and North Africa,'' it added.
The IMF expects the world economy to grow 4.4 percent in 2011 and expand 4.5 percent in 2012, both unchanged from its January estimates.
The U.S. economy is projected to rise 2.8 percent this year, down 0.2 point from the previous estimate and grow 2.9 percent the following year, up 0.2 point.
The IMF projects the eurozone economy to increase 1.6 percent in 2011, up 0.1 point from its January projection, and swell 1.8 percent in 2012, up 0.1 point.
Among emerging economies, the IMF held its growth projections for China steady at 9.6 percent and 9.5 percent in 2011 and 2012, respectively.
The fund also pressed China to step up efforts to allow the yuan to appreciate in line with its economic clout in the global financial market.
''For external surplus economies, many of which manage their currencies and do not face fiscal problems, removal of monetary accommodation and appreciation of the exchange rate are necessary to maintain internal balance...and assist in global demand rebalancing,'' the report said.