S&P Cuts Outlook on Japan’s Debt Outlook
S&P Cuts Outlook on Japan’s Debt Outlook
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S&P Global Ratings revised down the outlook on Japan’s sovereign rating to stable from positive while keeping the rating unchanged after Prime Minister Shinzo Abe’s record stimulus measures.
“The Covid-19 outbreak has set back Japan’s fiscal stabilization process but we expect that to get back on track in the next two to three years as the economy recovers,” S&P said in a statement Tuesday.
Japan’s rating of A+ for long-term and A-1 for short-term sovereign debt are affirmed, the credit ratings firm said. The stable outlook reflects S&P’s view that, until the fiscal year starting April 2023, relatively large deficits will keep upward pressure on the ratio of general government debt to gross domestic product, it said.
The downgrade comes after Abe pushed up his tally of economic measures to combat the virus impact to around $2 trillion with a record second extra budget last month. Japan’s new bond issuance will reach a record high of 90 trillion yen ($834 billion) this fiscal year, meaning more than a half of the country’s annual budget will rely on debt issuance.
This is likely to serve as a fresh reminder of the debt obligations the world’s third-largest economy has piled up as it tries to stoke growth.
Japanese ministers have said the government’s current priority amid the pandemic is to aggressively spend to keep companies and households afloat because restoring fiscal health is impossible without a sound economy.
The ratings report had little impact on the yen, which was trading at around 107.90 per dollar Tuesday evening in Tokyo.
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