Standard and Poor’s (S&P) said Japanese Prime Minister Yoshihiko Noda’s administration has not made progress in tackling the public debt burden, an indication the ratings agency could be preparing to lower the nation’s sovereign grade.
“Japan’s finances are getting worse and worse every day, every second,” Takahira Ogawa director of sovereign ratings at S&P in Singapore, said in an interview. Asked if that means he is closer to cutting Japan, he said it “may be right in saying that we’re closer to a downgrade, but the deterioration has been gradual so far, and it’s not like we’re going to move today.”
A reduction in S&P’s “AA-” rating would be a setback for Noda, who took office in September and has pledged to both steady Japan’s finances and implement reconstruction from the earthquake and tsunami in March. It is unrealistic for Japan to think it can escape the debt woes that have engulfed other nations unless it can control its finances, Ogawa said.
While Japan has enjoyed borrowing costs at global lows for its debt, the IMF said in a report released on its Web site on Wednesday that there is a risk of a “sudden spike” in yields that could make the debt level unsustainable.
S&P has had Japan on a negative outlook since April. Ogawa said the nation needs a “comprehensive approach” to containing its debt burden, which the government projects will exceed ￥1 quadrillion (US$13 trillion) in the year through March as the nation pays for reconstruction.
The yen pared gains after Ogawa’s remarks and was trading at ￥77.15 against the US dollar as of 3:23pm in Tokyo yesterday. Yields on Japan’s benchmark 10-year government bond rose to as high as 0.98 percent yesterday from the previous close of 0.965 percent, before the nation’s markets shut on Wednesday for a holiday. The Nikkei 225 Stock Average dropped 1.8 percent to 8,165.18, its lowest close since March 2009.
“The events in Europe show us that when you lose market confidence at some point, the situation deteriorates fast,” Ogawa said. “Politicians need to act with the understanding that they are running out of time” to fix the nation’s finances. “If you don’t act early, it will become even more difficult” to maintain market trust, he said.
Japan’s lower house of parliament yesterday approved legislation that would add an additional 2.1 percent levy to an individual’s annual payment. Lawmakers revised the government’s proposal to extend the period of the measure from 10 years to 25 years, to help pay for reconstruction. The measure will take effect in 2013.
“Just because this passes does not mean that it’s positive for the public finances,” Ogawa said. “Politicians are squabbling over the minute details, while avoiding what’s most important.”
While Japan’s policymakers have signaled they will double the nation’s sales tax from 5 percent by about 2015, a bill has yet to be enacted.
Moody’s Investors Service cut the nation’s debt rating by one step to “Aa3” on Aug. 24. S&P lowered Japan to “AA-” in January and Fitch Ratings also has Japan at “AA-,” with a negative outlook.
Cairo’s new monorail slices across the city skyline, running above the familiar chaos of blaring horns and aging buses’ exhaust fumes that mark rush hour below. The US$4.5 billion monorail, opened this month, is among Egypt’s most prominent new transport projects, part of a debt-funded infrastructure drive criticized for sapping state finances while bringing limited benefits to most of the country’s 109 million people. “It feels like you’re in a different country,” said Ramy Sayed, a restaurant manager, aboard a driverless Innovia 300 train. “No noise, no traffic, we’re not used to this.” The eastern line runs 56km from the bustling middle-class
Taiwanese firms have increased investment in the Philippines in recent years as Manila’s ties with Washington deepen and global supply chains continue to shift away from China, an expert at the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The Philippines had not been among Taiwanese investors’ top choices in Southeast Asia, CIER Taiwan ASEAN Studies Center director Kristy Hsu (徐遵慈) said at a seminar in Taipei. However, Taiwan’s investment in the country has grown significantly since the COVID-19 pandemic, reaching US $257 million last year, a high in recent years, she said. Although Taiwan’s total investment in the Philippines still lags
Intel Corp regards Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) as a longstanding partner, as the US chipmaker would continue outsourcing production of advanced chips to TSMC, Intel chief executive officer Lip-Bu Tan (陳立武) said yesterday. “I don’t look at people as competitors. I look at the collaboration... Nvidia is also, you know, a good friend,” Tan told a news conference following his keynote speech at the Computex trade show in Taipei. “It’s a very trusted partnership for us... We are a big, top customer for them, and we’re going to continue doing that,” he said, referring to TSMC, the world’s largest foundry
Artificial intelligence (AI) agents would supplant smartphones as the center of people’s digital lives, fundamentally reshaping personal devices and driving a major computing upgrade cycle, Qualcomm Inc CEO Cristiano Amon said yesterday. In his keynote speech for this year’s Computex trade show in Taipei, Amon said that the rise of "agentic AI" — AI systems capable of reasoning, planning and carrying out tasks autonomously — would transform how people interact with technology across phones, PCs, vehicles and wearable devices. Describing the technology as the next major evolution in computing, Amon said that "2026 is the year of agents.” For decades, smartphones have sat
RSS