Japan will likely see its gross government debt rise despite current measures to counter the deficit including tax hikes and spending cuts, the Organization for Economic Cooperation and Development (OECD) said in a report Monday.

According to the OECD's twice-yearly Economic Outlook report, despite planned tax hikes and spending cuts, Japan will see government debt rise to 230 percent of GDP in 2013, meaning the nation's public finances, already the worst in the industrialized world, are set to worsen further.

"A detailed and credible fiscal consolidation plan to meet the government's target of achieving a primary budget surplus and stabilizing the public debt ratio by FY 2020 is a top priority," the OECD report warned.

The OECD, in addition to Japan's rising government yields, also warned of a slowdown in the global economy as adding pressure to Japan's tattered finances and urged Japan to create an "objective fiscal assessment body" to deal with the nation's mounting fiscal obstacles.

The Paris-based organization said that while it expects Japan's economy to grow 2 percent for 2012, downgrading its earlier forecast for a 2.2 percent expansion, and by 1.6 percent in 2013, unfavorable currency moves dragging down the nation's key export sector and the ongoing fallout from the debt-plagued eurozone will ensure the continuation of deflationary pressure through 2013, the organization said.

The slowdown in Japan's economic growth will be due to post- quake reconstruction costs receding, the OECD said, and despite some relief provided by increased domestic capital spreading and improving global demand, the organization recommended Japan review its tax strategy in the best interests of the economy.

Currently, Japan plans to raise corporate taxes to help finance reconstruction and burgeoning social welfare costs, set to rise as Japan's ever-greying population increases, will be met by a hike in the sales tax. But the OECD instead suggested Japan lower corporate taxes and raise the sales tax to boost revenue.

The OECD said in the wake of the March disasters that Japan should immediately double its sales tax from 5 percent to 10 percent and in its latest outlook recommends hiking the rate of the controversial tax as high as 20 percent to raise much needed revenue.

The organization also called on Japan's central bank to do more to underpin the economy and unroll more monetary easing measures, including further expanding its asset-purchasing program in order to "bring a definitive end to more than a decade of deflation."

The troubled eurozone and the health of the U.S. economy presented notable downside risks to the health of the global economy, the OECD said, and in particular further unchecked debt contagion in Europe's single-currency region could derail the entire global economic recovery.

"Without preventive action, events could strengthen such pressures and plunge the euro area into a deep recession with large negative effects for the global economy," the OECD said.

Xinhua