Standard & Poor’s (S&P) yesterday said it was too early to adjust Japan’s sovereign rating at the moment after the nation was hit by the magnitude 9.0 earthquake on Friday, but the ratings agency placed Tokyo Electric Power Co (TEPCO) on a credit watch list with negative implications.
“The key factors determining the future trajectory of the sovereign credit rating on Japan include the overall macroeconomic impact of the earthquake, the pace and duration of reconstruction, and the impact on fiscal deficits,” S&P credit analyst Takahira Ogawa said in an e-mailed statement. “In addition, we need to assess the government’s ability to pursue its economic and fiscal reform agenda once reconstruction is well underway.”
S&P currently offers Japan an “AA-” long-term debt rating, the fourth-highest investment grade, and an “A-1+” short-term rating with a “stable” outlook.
Ogawa said the rating on Japan could be affected if the nation’s post-quake reconstruction work were to increase its debt burden to a level much higher than S&P’s expectations.
Moreover, the biggest uncertainty to the nation’s sovereign rating adjustment would be to what extent Japan can shut down its nuclear reactors safely and how reliable its future energy supply is, S&P said.
The earthquake on Friday has forced TEPCO to stop operations at its Fukushima Dai-ichi No. 1 and No. 2 nuclear power plants.
S&P currently rates TEPCO with “AA-” long-term corporate credit and debt ratings, and “A-1+” ratings for its short-term credit.
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