Japan and Taiwan may someday share the same credit rating as South Korea and China unless they push ahead with plans to bolster their banking systems and curb budget deficits, Standard & Poor's said.
Japan and Taiwan, which share a third-ranking "AA" rating, both have a "negative" outlook and face possible reductions. On the other hand, the outlook on South Korea's and China's ratings are "stable." Korea has an eighth-ranking "BBB+" rating, and China's "BBB" is one notch lower.
"There's a possibility that if Japan and Taiwan fail to address their problems and if Korea and China do things better," their ratings may converge on the "A" category, said Takahira Ogawa, regional director of sovereign ratings for Standard & Poor's.
S&P lowered Japan's rating twice last year, putting the world's second-largest economy on a par with Italy as the lowest-rated members of the Group of Seven industrial nations. The others -- France, Canada, Germany, the UK and the US -- all have top-ranked "AAA" ratings.
Japan's credit rating faces a possible reduction because its plan to beat deflation by getting banks to sell bad loans isn't expected to stoke a recovery. Taiwan's debt rating may be downgraded if public finances worsen or if a banking crisis emerges, the credit rating agency said in December.
Meanwhile, Taiwan and China need to overhaul their tax and banking systems to bolster growth, the credit agency has said.
"More than anything else, changes in ratings for these four governments will turn on the results of their reform agendas," Standard and Poor's said in its report. "The `A' category could host both the courageous and the timid in the quest for reform."
RSS