Sliding prices, massive bad loans at banks and mounting government debt continue to threaten Japan's sovereign debt rating, which could be downgraded within two years, Standard and Poor's said yesterday.
At the same time, progress in tackling the nation's economic woes would support the rating at its current level and could lead to an upgrade of Japan's outlook, said S&P credit analyst Takahira Ogawa.
The rating agency affirmed Japan's AA-minus long-term rating -- the weakest of the Group of Seven rich countries -- and A1-plus short-term local currency ratings, with the outlook remaining negative.
"In the short term, it will be very difficult for Japan to deal with its pressing problems: to overcome deflation; to improve banking sector non-performing loans [NPLs]; and to stabilize fiscal deficits and the debt burden," Ogawa said in a statement.
"If deflation is not contained, banking system NPLs and government finances will deteriorate and undermine the ratings on the sovereign," he warned.
The negative outlook means S&P may downgrade Japan's sovereign rating within one or two years "if ... things go on as they are," Ogawa said later by phone from Singapore.
"But if there are good developments in economic policy, if Japan can come out of deflation [the rating] might stay," he said, adding that the outlook could also be raised.
Japan remains the world's second-largest economy with net foreign assets worth a staggering yen1.46 trillion, a strong current account surplus and a widely-traded currency, S&P noted.
Other positive factors include the nation's highly skilled workforce, world-leading manufacturing industry and high savings rate, the agency said.
But deflation, which hurts corporate profits and deters consumer spending as people wait for prices to fall further, has aggravated Japan's fiscal and financial problems since the middle of the 1990s.
Government debt -- which at around 140 percent of GDP is the highest among industrialized nations -- is expected to grow, while Japanese banks remained buried under huge bad loans.
The government has instructed banks to halve the ratio of bad loans on their accounts by March 2005 and re-evaluate other assets -- a move that prompted regional lender Resona Holdings to ask for a government bailout last month.
S&P is wary about whether the banks will return to health.
"Japan still cannot find its way out of deflation, which is exacerbating the banking sector's non-performing loans problem," it said.
"Deflation is also negatively impacting economic growth, which in turn delays fiscal consolidation," it said.
A change in the Bank of Japan governor last March offered a glimmer of hope that monetary policy may be stretched further to provide help, Ogawa said.
"Nevertheless it is rather difficult for only the Bank of Japan and monetary policy to help Japan come out of deflation," he warned.
"You need policy coordination with the government and the Bank of Japan. Unfortunately the government side is less flexible," he said.
Apple Inc increased iPhone production in India by about 53 percent last year and now makes a quarter of its marquee devices there, reflecting the US company’s efforts to avoid tariffs on China. The company assembled about 55 million iPhones in India last year, up from 36 million a year earlier, people familiar with the matter said, asking not to be named because the numbers aren’t public. Apple makes about 220 million to 230 million iPhones a year globally, with India’s share of the total increasing rapidly. Apple has accelerated its expansion in the world’s most populous country in recent years, bolstered
Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) share of the global foundry market rose to almost 70 percent last year amid booming demand for artificial intelligence (AI), market information advisory firm TrendForce Corp (集邦科技) said on Thursday. The contract chipmaker posted US$122.54 billion in revenue, up 36.1 percent from a year earlier, accounting for 69.9 percent of the global market, TrendForce said. Its share was up from 64.4 percent in 2024, it said. TSMC’s closest rival, Samsung Electronics, was a distant second, posting US$12.63 billion in sales, down 3.9 percent from a year earlier, for a 7.2 percent share of the global market. In the
DAMAGE REPORT: Global central banks are assessing war-driven inflation risks as the law of unintended consequences careens around the world, spiking oil prices Central banks from Washington to London and from Jakarta to Taipei are about to make their first assessments of economic damage after more than two weeks of conflict between the US and Iran. Decisions this week encompassing every member of the G7 and eight of the world’s 10 most-traded currency jurisdictions are likely to confirm to investors that the specter of a new inflation shock is already worrying enough to prompt heightened caution. The US Federal Reserve is widely expected to do exactly what everyone anticipated weeks ahead of its March 17-18 policy gathering: hold rates steady. The narrative surrounding that
HEADWINDS: The company said it expects its computer business, as well as consumer electronics and communications segments to see revenue declines due to seasonality Pegatron Corp (和碩) yesterday said it aims to grow its artificial intelligence (AI) server revenue more than 10-fold this year from last year, driven by orders from neocloud solutions clients and large cloud service providers. The electronics manufacturing service provider said AI server revenue growth would be driven primarily by the Nvidia Corp GB300 server platform. Server shipments are expected to increase each quarter this year, with the second half likely to outperform the first half, it said. The AI server market is expected to broaden this year as more inference applications emerge, which would drive demand for system-on-chip, application-specific integrated circuits
RSS