Standard & Poor's cut Japan's credit rating for the first time in almost nine years Thursday, issuing a harsh critique of the government's ability to control its ballooning debt. The agency lowered Japan's long-term sovereign debt rating one notch to AA-, which is the fourth highest level and the same rating given to China, Saudi Arabia and Kuwait. The news sent the dollar as high as ¥83.18 from ¥82.20.
The downgrade is a stern reminder to Japan that it faces consequences for letting its debt swell to twice the size of gross domestic product. Prime Minister Naoto Kan is pushing to reform the country's tax and social security systems, but the downgrade could complicate the fiscal picture by making it more expensive to finance the country's debt. Creditors typically demand higher interest rates when credit ratings fall.
Japan's debt ratio, already among the highest in the developed world, is on track to rise more than expected and won't peak until the mid-2020s, S&P said in a statement. The country's problems, it added, are exacerbated by persistent deflation and a rapidly aging population.
Japan is the world's fastest-aging country, with its population projected to shrink from 127 million people now to 90 million by 2055 — 40 percent of whom will be over 65. (more)
No comments:
Post a Comment