Tokyo-based Ratings & Investment Information Inc (R&I) cut Japan’s sovereign ranking for the first time, citing “uncertain” prospects for economic recovery.
R&I lowered Japan’s foreign and domestic-currency issuer ratings one step to “AA+” from “AAA,” the company said in a statement yesterday.
The company had put Japan on its ratings monitor for a downgrade on Nov. 30.
Japan’s outstanding government debt “would inevitably rise for an extensive period of time” even if the sales tax rate were increased, the statement said.
Real GDP is likely to contract this fiscal year as the strong yen and effects from an earthquake and tsunami in March weigh on the economy, it said.
“Prospects for economic revitalization are also uncertain,” the ratings company said. “R&I can no longer consider the government’s ability to adjust fiscal conditions on its own to be at a level required for the highest rating.”
The Bank of Japan lowered its assessment for the nation’s economy for a second straight month yesterday, while refraining from boosting monetary stimulus.
Bank of Japan Governor Masaaki Shirakawa and his policy board kept the central bank’s asset-buying fund at ￥20 trillion (US$257 billion) and its credit-lending program at ￥35 trillion.
“The major root cause for Japan’s worsening finances is an economy that isn’t growing,” said Tadashi Matsukawa, who helps manage the equivalent of US$1.7 billion in bonds at PineBridge Investments Japan Co. “Cutting government expenditure is difficult, in that voters are generally reluctant to pay and prefer to receive.”