IMF forecasts Japan recession

The International Monetary Fund (IMF) has issued a bleak outlook for the Japanese economy.

In its annual assessment, IMF officials warned that Japan faced re-entering a cycle of rising bankruptcies and slowing activity - factors the IMF said would exacerbate the global economic downturn.

The IMF also forecast a reduction in Japan's economic activity of 0.2% for the year, with negative growth ahead.

Earlier, the Japanese cabinet approved a budget which included the first cut in government spending for four years.

Spending was cut to just under 390$bn in an effort to reduce the country's large budget deficit.

The IMF said it welcomed signs that the government of Prime Minister Junichiro Koizumi was committed to addressing the root problems in the economy.

From the newsroom of the BBC World Service