Woes force Moody's to cut Japan's rating
Source: Agencies |
August 25, 2011, Thursday
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MOODY'S downgraded Japan's credit rating, citing the country's weak growth prospects, massive government debt and constant political uncertainty.
The cut in Japan's government bond rating yesterday to Aa3 from Aa2 puts the country three notches below Moody's top Aaa rating. Moody's Investors Service said the outlook for the rating is stable.
The rating cut comes ahead of another leadership shuffle in Japan. With his popularity sinking, Prime Minister Naoto Kan and his Cabinet are preparing to resign next week. That would set the stage for a leadership election within the ruling party and a new prime minister - Japan's sixth in four years.
Frequent administration changes have prevented Japan's government from adopting effective long-term economic and fiscal policies, Moody's said.
Kan has been criticized for lacking leadership after the March 11 earthquake and tsunami and subsequent nuclear crisis, and survivors of the disasters complain of slow relief and recovery efforts. Polls show his approval rating is below 20 percent.
The country's economic problems are compounded by the natural disaster and the ongoing nuclear crisis. Japan's ballooning debt is now twice the size of the country's gross domestic product.
"These developments further hamper the economy's ability to achieve a growth rate strong enough to steadily reduce the budget deficit," Moody's said.
The downgrade puts Moody's Japan rating in line with other major agencies. Both Standard & Poor's and Fitch rate Japan AA-, three notches below their top AAA ratings.
In May, Moody's warned it could downgrade Japan after the world's No. 3 economy slipped back into recession in the first quarter due to tumbling output and exports following the earthquake and tsunami.
Moody's has maintained its AAA rating on the United States while Standard & Poor's earlier this month took the unprecedented step of downgrading the US.
The cut in Japan's government bond rating yesterday to Aa3 from Aa2 puts the country three notches below Moody's top Aaa rating. Moody's Investors Service said the outlook for the rating is stable.
The rating cut comes ahead of another leadership shuffle in Japan. With his popularity sinking, Prime Minister Naoto Kan and his Cabinet are preparing to resign next week. That would set the stage for a leadership election within the ruling party and a new prime minister - Japan's sixth in four years.
Frequent administration changes have prevented Japan's government from adopting effective long-term economic and fiscal policies, Moody's said.
Kan has been criticized for lacking leadership after the March 11 earthquake and tsunami and subsequent nuclear crisis, and survivors of the disasters complain of slow relief and recovery efforts. Polls show his approval rating is below 20 percent.
The country's economic problems are compounded by the natural disaster and the ongoing nuclear crisis. Japan's ballooning debt is now twice the size of the country's gross domestic product.
"These developments further hamper the economy's ability to achieve a growth rate strong enough to steadily reduce the budget deficit," Moody's said.
The downgrade puts Moody's Japan rating in line with other major agencies. Both Standard & Poor's and Fitch rate Japan AA-, three notches below their top AAA ratings.
In May, Moody's warned it could downgrade Japan after the world's No. 3 economy slipped back into recession in the first quarter due to tumbling output and exports following the earthquake and tsunami.
Moody's has maintained its AAA rating on the United States while Standard & Poor's earlier this month took the unprecedented step of downgrading the US.
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