Earthquake 'collapse' to Japan

Japan's economy will slow significantly this year after the earthquake of March and the government needs to redistribute items of expenditure to rebuild the affected areas of the northeast and ensure faster growth next year, the OECD said on Thursday.

Gross domestic product would grow 0.8% this year, well below the 1.7% previously estimated by the Organization for Economic Cooperation and Development, due to damage caused by the disaster of 11 March.

Then, the economy would expand by 2.3% in 2012, more than the 1.3% projected earlier, as gains speed reconstruction, the OECD estimated in a report.

Government spending to rebuild damaged infrastructure is inevitable, but the government must show fiscal discipline and at some point will have to raise the sales tax to 20% from 5% now, according to the OECD.

"The immediate impact of the horrendous disaster would be great yse extend beyond the areas devastated by the earthquake and tsunami," the report said.

"However, the experience of recent disasters in Japan and other countries suggests that the negative impact in the short term económicaserá production followed by a rebound as rebuilding takes hold," he added.

Japan is facing its worst crisis since the Second World War after a magnitude 9.0 earthquake and a tsunami with waves up to 10 meters high struck the northeast coast, leaving 28.000 people dead or missing and causing radioactive leaks at plant nuclear.

The government estimates the damage in only 300.000 million, in what would be the costliest natural disaster in history.

The Government presented in Parliament next week extra budget of 4 trillion yen (48.500 million dollars) to remove debris and build temporary housing.

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