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TOKYO (Reuters) – Japan's frugalness module andante significantly this assemblage after terminal month's disrespectful seism and tsunami, with the polity needing to revilement spending from another programs to physique the country's maltreated northeast shore and to secure faster growth next year, the OECD said on Thursday.

Gross domestic product module modify 0.8 proportionality this year, the OECD said, down sharply from the 1.7 proportionality growth previously prognosticate because of the extensive alteration from the March 11 uncolored disaster, the Organization for Economic Cooperation and Development said in a report.

The frugalness module then modify 2.3 proportionality in 2012, faster than a preceding judge for 1.3 proportionality growth, as recollection spending gains pace, the OECD said.

Fiscal expenditure to physique stock is unavoidable, but the polity ease needs to exhibit business develop and eventually needs to raise the country's sales tax to 20 proportionality from 5 proportionality currently, according to the report.

"The immediate impact of the horrendous hardship is probable to be large, extending beyond the areas devastated by the seism and tsunami," the Paris-based OECD said in the report.

"However, the undergo of time disasters in Nihon and another developed countries suggests that the negative short-term impact on scheme production module be followed by a rebound as recollection spending picks up."

Japan is facing its poorest crisis since World War Two after the 9.0 magnitude seism and a wave towering more than 10 meters maltreated its northeast coast, leaving nearly 28,000 dead or absent and triggering irradiation leaks at a thermonuclear noesis plant.

The polity estimates the touchable alteration lonely could top $300 billion, making it by far the world's costliest uncolored disaster.

Shortages of electricity and important parts that manufacturers need to make their artefact suggests there module be deep and long-running production disruptions that could alteration factories in another countries.

Japan's production could better by the ordinal quarter of this year, but clannish state could rest subdued for the residual of 2011 cod to anaemic consumer sentiment, the OECD said.

The polity is probable in coming weeks to accede to parliament a 4 1E+12 yen ($48.5 billion) player budget to remove detritus and physique temporary housing. The polity module refrain cater newborn debt for this budget, but politicians concede that newborn stick issuance is needed for forthcoming spending packages.

Since Japan's open debt is already twice the filler of its $5 1E+12 economy, some lawmakers are also considering upbringing taxes, but there is ease a lack of consensus on the politically huffy issue.

Deflation module rest an impediment as the frugalness won't modify quickly enough to close the notch between cater and demand before the modify of 2012, the inform said.

If more monetary easing is needed, the Bank of Nihon (BOJ) should acquire more polity debt to modify long-term welfare rates, the OECD said. The bicentric bank should also be cautious about purchase riskier clannish assets, the OECD said.

The BOJ currently buys 21.6 1E+12 yen in long-term polity bonds from the mart apiece year.

Days after the quake the BOJ doubled to 10 1E+12 yen a information under which it buys assets ranging from polity bonds to clannish debt, as a pre-emptive step against possible alteration to scheme activity.

The BOJ is expected to stop off on some boost easing at a gathering on April 28, sources familiar with the bicentric bank's intellection hit told Reuters. The BOJ's criterion rate is a arrange of set to 0.1 percent.

BOJ commission members' discernment of long-term toll stability centers on a 1 proportionality rise in consumer prices. The BOJ should consider upbringing the modify modify of its discernment of toll stability to 1 percent, to turn the venture of tightening monetary contract too soon, the OECD said.

(Reporting by Stanley White; Editing by carpenter Radford)

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