1 Dec 2014
Moody's cuts Japans credit rating over heightened uncertainty over fiscal deficit reduction goals
FXStreet (London) - Credit ratings agency Moody’s today cut Japan’s government debt rating by one notch to A1 from Aa3, holding its outlook stable.
The agency pointed to the key drivers for the downgrade as:
- Heightened uncertainty over the achievability of fiscal deficit reduction goals;
- Uncertainty over the timing and effectiveness of growth enhancing policy measures, against a background of deflationary pressures; and
- In consequence, increased risk of rising JGB yields and reduced debt affordability over the medium term.
Moody’s said that its stable outlook for the Japanese government reflects the “broad balance between upside risks including significant fiscal consolidation and a resumption of economic growth, and downside risks including intensification of deflationary pressures and loss in economic momentum.”
The change in Moody’s assessment of Japanese government debt does not change its Aaa rating for Japan’s foreign currency, local currency country and bank deposit ceilings.
The agency pointed to the key drivers for the downgrade as:
- Heightened uncertainty over the achievability of fiscal deficit reduction goals;
- Uncertainty over the timing and effectiveness of growth enhancing policy measures, against a background of deflationary pressures; and
- In consequence, increased risk of rising JGB yields and reduced debt affordability over the medium term.
Moody’s said that its stable outlook for the Japanese government reflects the “broad balance between upside risks including significant fiscal consolidation and a resumption of economic growth, and downside risks including intensification of deflationary pressures and loss in economic momentum.”
The change in Moody’s assessment of Japanese government debt does not change its Aaa rating for Japan’s foreign currency, local currency country and bank deposit ceilings.