TOKYO-Standard & Poor’s on Wednesday lowered Japan’s sovereign debt rating one notch, in the latest sign of concern about Japan’s economic prospects almost three years after Prime Minister Shinzo Abe took power.
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S&P cut its rating on Japan from AA- to A+, which is four notches below its top rating of AAA. S&P then gave a long-term rating outlook of “stable” citing its expectations that the country’s credit metrics will remain broadly unchanged over the next two years.
While the crisis is unlikely to weaken European Union economies and budgets enough to lower sovereign ratings, it said there would be significant fiscal implications in the short term, with host countries having to administer shelter, subsistence and education.
The downgrade brings its Japan rating into line with rival ratings agency Moody’s Investors Service, which downgraded Japan to A1 in December past year. Akito Fukunaga, chief bond strategist at Barclay’s, said ratings cuts in general wouldn’t be expected to change prices significantly, given that most Japanese government debt is held by Japanese institutions.
“Despite showing initial promise, we believe that the government’s economic revival strategy – dubbed “Abenomics”- will not be able to reverse this deterioration in the next two to three years”, it added. Japan is struggling with near zero inflation rate and a shrinking GDP in the previous quarter.
The move comes the day after the Bank of Japan held fire on expanding its already vast monetary easing programme, although economists warned more stimulus could be needed to boost the sagging economy.
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A finance ministry official said it had no plan to issue a statement. “Korea has exhibited stronger economic performance in recent years than other high-income economies”, S&P said, while not being dependent on one particular export market.
