RTTNews - The International Monetary Fund in a report released Wednesday said the Japanese economy is expected to contract 6% this year, but expand 1.75% in the next year.

The IMF said that despite tentative signs of stabilization in the country and the global economy, the outlook remains uncertain. The risks to the outlook remain on the downside, reflecting the rapidly deteriorating labor market, tight financial conditions, and external uncertainties, it said. Further, the IMF forecasts that inflation in Japan will remain negative until 2011.

A sustained recovery will likely emerge during the course of 2010 but will hinge critically on improvement in overseas lending conditions and trade, the international lender pointed out.

The IMF welcomed the fiscal stimulus packages announced by the Japanese government and emphasized the need for continued flexibility to address further downside risks. Going forward, the IMF also supported additional credit easing measures, should the downside risks materialize or the financial stresses resurface.

For comments and feedback: contact editorial@rttnews.com