March 31 (Bloomberg) -- Japan’s public debt is likely to surge to 197.3 percent of gross domestic product next year, limiting the government’s ability to spend more to revive growth, the Organization for Economic Cooperation and Development said.

“With the debt ratio projected to approach 200 percent in 2010, the scope for additional fiscal stimulus is limited,” the Paris-based organization said in a report today. “It will be important to focus again on fiscal consolidation as the economy stabilizes.”

Prime Minister Taro Aso said today that he aims to compile a new stimulus package by mid-April to help households hurt by a recession that’s likely to be Japan’s worst since World War II. The deepening global slump has spurred unprecedented drops in exports and industrial output and pushed unemployment to a three-year high.

In November, the OECD estimated the ratio would rise to 177 percent next year. The debt burden was 172.1 percent in 2008, the highest among member countries, compared with 71.9 percent in the U.S. and 113.1 percent in Italy, OECD data show.

The Bank of Japan needs to keep interest rates close to zero and continue its asset-purchase program until there is a “definitive” end to deflation, today’s report said. Since it lowered the key overnight lending rate to 0.1 percent in December, the central bank has been buying corporate bonds and shares from lenders.

To contact the reporter on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net

Last Updated: March 31, 2009 05:00 EDT