S&P Gives Japan’s Credit Rating a Negative Outlook
Posted on January 28, 2010
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Credit rating agency Standard & Poor’s says it may downgrade Japan’s current AA sovereign debt rating by one “notch,” which would bring it to AA-. That’s particularly noteworthy because Japan is either the world’s No. 2 or No. 3 economy by GDP, virtually tied with China. S&P has officially changed its outlook on Japan’ debt from stable to negative.
In a statement S&P says an actual rating downgrade could occur “if economic data remain weak and measures to boost medium-term growth are not forthcoming, given the country’s high government debt burden and its weak demographic profile.”
S&P’s worries about the creditworthiness of developed nations aren’t rooted just in debt growth. The tremendous recession has laid low housing values and increased joblessness at a time when consumers are still carrying a great deal of debt. Some economists believe unemployment in the U.S. will remain high for three or four more years. Without a rebound in consumer spending, which seems unlikely, GDP growth and tax receipts will almost certainly stay weak. That means rapid economic improvement alone won’t close the deficit .
Japan is a canary in the credit coal mine for the U.S. and U.K. And it has only very limited ways to solve the problem, such as raising taxes or cutting critical government services. Those unpopular measures aren’t likely to be attractive alternatives for the politicians in any country who would have to propose and approve them.
Read Full Article Here: S&P Gives Japan’s Credit Rating a Negative Outlook – DailyFinance.
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