Japan's economy will shrink 0.7% this year because of the massive earthquake and tsunami which struck the country in March, said the IMF.
The IMF, which had previously forecast a growth figure of 1.4% for the country, also said Tokyo should push through tough measures to cut its debt, reports the BBC.
Japan's debt is higher than any other developed nation relative to the size of its economy.
However, against these economic "headwinds" triggered by the March disaster, the international body said Japan's economy should recover strongly in the second half of the year.
The IMF is currently looking for a new managing director following the resignation of Dominique Strauss-Kahn amid allegations of sexual assault.
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