The government and the Bank of Japan responded "forcefully" to Japan's recession, which should help to spur a recovery next year, the International Monetary Fund said.
"Japanese policymakers have responded forcefully by providing much needed fiscal stimulus and monetary policy support, which should contribute significantly to growth this year and next," the IMF said in a statement Wednesday.
Prime Minister Taro Aso has pledged ¥25 trillion to revive an economy in its deepest recession since 1945 and the BOJ lowered its benchmark interest rate to 0.1 percent and bought government and corporate debt. The efforts appear to be paying off, with consumer confidence rising to a 10-month high and the Nikkei 225 stock average advancing a third since tumbling to a 26-year low in March.
"A sustained recovery is expected to take hold in 2010, but much depends on the timing and strength of the global recovery," the Washington-based lender said.
The economy shrank at a record 15.2 percent annual pace last quarter as exports collapsed and consumers and businesses slashed spending, the Cabinet Office said Wednesday. Economists say this may represent the worst of the country's deepest recession since records began in 1955.