S&P affirms Japan but warns of downgrade risk
Share
Standard & Poor’s (S&P) has maintained Japan’s AA- long-term sovereign credit rating but warns that the country’s outlook remains negative.
The ratings agency says the country’s rating is “supported by the country’s ample net external asset position, relatively strong financial system, and diversified economy”.
It also cites the yen’s status as a key international reserve currency as a support for its sovereign rating.
“However, Japan’s sovereign ratings are constrained by the government’s weak policy foundations, large fiscal deficits, and high debt, as well as prolonged deflation and an aging and shrinking workforce,” S&P adds.
Japan could be downgraded if the medium-term growth prospects for real GDP per capita fall from S&P’s current projection of 1.2%.
“We would also consider lowering the long- and short-term ratings if the government’s debt trajectory remains on its current course or begins to erode the nation’s external position,” the agency notes.
According to the International Monetary Fund (IMF), Japan’s general government gross debt is expected to rise from 238.4% of GDP at the start of 2012 to 242.9% by the end of the year.
On August 24, Moody’s downgraded Japan by one notch to Aa3, giving the government’s growing debt since 2009 as a reason. Fitch gives the country a AA- rating with negative outlook.
To receive more relevant articles like this one, why not sign up to our briefings and breaking alerts by clicking here and Follow @fundweb
