The IMF forecast Japan's economy would grow 1.4 percent in 2011 compared with an earlier forecast of 1.6 percent made before the March 11 earthquake and tsunami hit production and shattered supply chains.

The disaster plunged Japan into its worst crisis since World War II, unleashing a tsunami that erased entire towns to leave 27,000 dead or missing, destroyed infrastructure and triggered a nuclear emergency.

In its twice-yearly World Economic Outlook, the IMF noted the disaster's "terrible human toll".

"Its macroeconomic impact is projected to be limited, although uncertainty remains elevated," it said.

Growth in long-struggling Japan bounced back to 3.9 percent in 2010 after contracting 6.3 percent in 2009 amid the global financial crisis.

However, the IMF warned that the full economic impact of the March 11 disasters had yet to emerge.

"There are large uncertainties associated with the 'Tohuku' earthquake," the Washington-based organisation said. Japan has said the cost of rebuilding could cost as much as 25 trillion yen ($295 billion).

The monster wave devastated the northeast coast, triggering an atomic emergency after knocking out reactor cooling systems at the Fukushima nuclear plant north of Tokyo, causing explosions and the release of radiation.

Tens of thousands of people have been evacuated from a 20-kilometre (12-mile) radius around the plant amid a contamination scare that has led to restrictions on farm produce and overseas bans on the import of Japanese goods.

The IMF noted that official estimates of the damage range between 3.0 to 5.0 percent of gross domestic product, or roughly twice the cost of the Kobe earthquake in 1995.

"This figure, however, does not account for the effects of possible power shortages and ongoing risks associated with the crisis at the Fukushima-Daiichi nuclear power plant," it said.

The Fukushima crisis and damage to other facilities have led to rolling power blackouts that have hit production at industrial giants such as Toyota, Honda and Sony.

Japan generates about 30 percent of its power from nuclear energy. Industrial output overseas has also been compromised, with a shortage of Japanese components sending ripples through global markets.

Several thermal power plants were also damaged on March 11, leaving the greater Tokyo region served by Fukushima's operator TEPCO facing a power supply shortfall of at least 20 percent of demand.

The IMF sees Japan's economy growing 2.1 percent in 2012, but said its figures were based on the assumption that "the power shortages and the nuclear crisis are resolved within a few months".

A mammoth rebuilding task will be required, but Japan faces a huge challenge in financing it without expanding a public debt that is already the industrialised world's biggest at around 200 percent of GDP.

Ratings agency Standard & Poor's in January cut Japan's credit rating for the first time since 2002, and in February Moody's lowered its outlook for Japan's sovereign debt to "negative".

Both agencies cited concern that Japan lacked the political will to tackle its debts.

"In Japan, the recent downgrade of sovereign debt has highlighted the importance of having a more credible fiscal adjustment plan," the IMF said.

"Once the extent of the earthquake's damage becomes clearer and reconstruction efforts are under way, the authorities will need a more credible fiscal strategy that brings down the public debt ratio over the medium term while addressing the need for additional reconstruction spending."

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