Fitch cuts Japan credit rating two notches
19:42 AEDT Tue May 22 2012
Fitch has cut Japan's credit rating by two notches, citing public debt.
The international agency downgraded its long-term rating to A+ from AA, with a negative outlook, saying it reflected "growing risks for Japan's sovereign credit profile as a result of high and rising public debt ratios".
Japan's national debt amounts to more than twice its gross domestic product, the highest among industrialised nations.
But its bonds are mostly held by domestic, long-term investors, meaning Japan pays low interest rates on its debt and is less vulnerable to criticism from foreign buyers over the nation's fiscal management - a fate that has befallen Greece.
However, Fitch said the nation's debt load is projected to hit 239 per cent of output by the end of the year, "by far the highest for any Fitch-rated sovereign" debt.
"The country's fiscal consolidation plan looks leisurely relative even to other fiscally challenged high-income countries, and implementation is subject to political risk," Fitch said in a statement.
Japan's Prime Minister, Yoshihiko Noda, is trying to double the nation's consumption tax to stem the surging national debt, as the costs of a rapidly ageing population puts pressure on resources.
The downgrade comes just days after Tokyo upgraded its view of the economy for the first time in nine months, a day after better-than-expected growth figures and thanks to an increase in exports and consumer spending.
Japan's economy grew a better-than-expected one per cent in the three months to March, a glimmer of hope for an economy hampered by years of deflation and stuttering growth.
19:42 AEDT Tue May 22 2012
Fitch has cut Japan's credit rating by two notches, citing public debt.
The international agency downgraded its long-term rating to A+ from AA, with a negative outlook, saying it reflected "growing risks for Japan's sovereign credit profile as a result of high and rising public debt ratios".
Japan's national debt amounts to more than twice its gross domestic product, the highest among industrialised nations.
But its bonds are mostly held by domestic, long-term investors, meaning Japan pays low interest rates on its debt and is less vulnerable to criticism from foreign buyers over the nation's fiscal management - a fate that has befallen Greece.
However, Fitch said the nation's debt load is projected to hit 239 per cent of output by the end of the year, "by far the highest for any Fitch-rated sovereign" debt.
"The country's fiscal consolidation plan looks leisurely relative even to other fiscally challenged high-income countries, and implementation is subject to political risk," Fitch said in a statement.
Japan's Prime Minister, Yoshihiko Noda, is trying to double the nation's consumption tax to stem the surging national debt, as the costs of a rapidly ageing population puts pressure on resources.
The downgrade comes just days after Tokyo upgraded its view of the economy for the first time in nine months, a day after better-than-expected growth figures and thanks to an increase in exports and consumer spending.
Japan's economy grew a better-than-expected one per cent in the three months to March, a glimmer of hope for an economy hampered by years of deflation and stuttering growth.