WASHINGTON, July 28: The IMF said on Friday it sees Japan’s economic growth accelerating this year after a decade-long slump but urged the government to fix its worsening finances and undertake more ambitious reforms.

In an annual review of the world’s second-biggest economy, the International Monetary Fund forecast that Japanese gross domestic product (GDP) would expand by 2.9pc in 2006.

That is higher than an IMF forecast for 2006 of 2.75 per cent given only in May. But next year, the Fund predicted Japan’s economy would slow to growth of 2.1 per cent.

The IMF called also for more policy transparency from the Bank of Japan (BoJ) after it ended an unprecedented era of zero interest rates this month by hiking borrowing costs for the first time in almost six years.

“The post-bubble adjustment is essentially complete. Economic activity is expanding robustly, driven by domestic demand,” the IMF's so-called “Article Four” appraisal of Japan said.

“The financial and corporate sectors are strengthening further. Corporate restructuring is spurring productivity gains and yielding record profits,” it said.—AFP