Japan's credit rating negative
By Leika Kihara |
May 24, 2011, Tuesday
|
Print Edition
Print Edition
JAPAN'S return to recession and a bigger-than-expected slump in first-quarter economic growth are negative for its credit rating, Moody's Investors Service said, warning that a delay in recovery could warrant additional fiscal and monetary stimulus.
The triple blow of the March earthquake, tsunami and nuclear crisis has nudged Japan into recession and led to a surprisingly deep 0.9 percent contraction in January-March, which Moody's said was negative for Japan's rating and made it increasingly urgent for Prime Minister Naoto Kan to compile a second extra budget.
"Reconstruction and relief expenditures will eventually lead to a rebound in economic growth later this year and in 2012," Moody's said in a statement yesterday.
"But the scale of the loss in output and income caused by the earthquake may already have lowered the future growth trajectory of the Japanese economy, thwarting Japan's long-term growth rate, which is currently around 1 percent," Moody's said.
While the shock from power shortages will be temporary, the risk of Japanese companies permanently losing global market share due to current supply chain disruptions is more damaging, Moody's said.
"Should the rebound in Japan's economy be weaker than forecast or delayed entirely, additional actions by both the Ministry of Finance and Bank of Japan may be needed," the statement said.
Japan is facing its worst crisis since World War II after the 9.0 magnitude earthquake and a deadly tsunami battered its northeast coast on March 11, leaving about 25,000 dead or missing and crippling a nuclear power plant.
The economy shrank in the January-March period at nearly double the pace forecast by markets and is expected to contract again in the second quarter as supply chain disruptions and power shortages severely hit factory output.
The Bank of Japan eased monetary policy days after the quake but has stood pat since then on the view - shared by many economists - that growth will pick up from around autumn when supply constraints ease.
The triple blow of the March earthquake, tsunami and nuclear crisis has nudged Japan into recession and led to a surprisingly deep 0.9 percent contraction in January-March, which Moody's said was negative for Japan's rating and made it increasingly urgent for Prime Minister Naoto Kan to compile a second extra budget.
"Reconstruction and relief expenditures will eventually lead to a rebound in economic growth later this year and in 2012," Moody's said in a statement yesterday.
"But the scale of the loss in output and income caused by the earthquake may already have lowered the future growth trajectory of the Japanese economy, thwarting Japan's long-term growth rate, which is currently around 1 percent," Moody's said.
While the shock from power shortages will be temporary, the risk of Japanese companies permanently losing global market share due to current supply chain disruptions is more damaging, Moody's said.
"Should the rebound in Japan's economy be weaker than forecast or delayed entirely, additional actions by both the Ministry of Finance and Bank of Japan may be needed," the statement said.
Japan is facing its worst crisis since World War II after the 9.0 magnitude earthquake and a deadly tsunami battered its northeast coast on March 11, leaving about 25,000 dead or missing and crippling a nuclear power plant.
The economy shrank in the January-March period at nearly double the pace forecast by markets and is expected to contract again in the second quarter as supply chain disruptions and power shortages severely hit factory output.
The Bank of Japan eased monetary policy days after the quake but has stood pat since then on the view - shared by many economists - that growth will pick up from around autumn when supply constraints ease.
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