Japan could grow steadily by 2.0 percent in both 2006 and 2007 because the world's second-largest economy is now less dependent on exports and its expansion is spreading to domestically oriented activity, the Organization for Economic Cooperation and Development said Tuesday.
The projected real-term growth in gross domestic product compares with the 2.4 percent expansion forecast for 2005, according to an economic outlook released by the Paris-based club of rich nations.
Japan's economic expansion is broadening, the OECD said.
Its economic activity has extended beyond export-dependent sectors, with corporate investment starting to pick up.
Private consumption is still somewhat subdued but has benefited from a progressive shift from mostly part-time to mainly full-time hiring, it said.
The economy has also found a supportive factor in waning declines of property prices.
But the OECD said Japan still needs to continue its battle against deflation. The country's core consumer price index has been dropping steadily, although the declines are close to zero.
The Bank of Japan should not move to tighten monetary policy until the country has securely exited from deflation, the OECD said.
In Tokyo, a senior Finance Ministry official said Tuesday that there are no major differences between its views and those of the Bank of Japan regarding monetary policy management.
The remarks came before the two-day meeting of finance ministers and central bank chiefs from the Group of Seven major industrial nations slated to start Friday in London.