Moody’s: Japan rating hinges on its fiscal plan

Reuters | Mon Jun 28, 2010 | 11:04am IST

Japanese yen bills Japan’s sovereign rating may face downward pressure over the next couple of years if the government fails to stick to its plan for fixing public finances, Moody’s Investors Service said on Monday. Japan set ambitious targets to rein in its debt last week but also said these goals could not be met even under its rosiest growth scenario, the latest sign that the government may have to push through contentious tax hikes.

Moody’s views Japan’s fiscal plan with a "positive nuance", Tom Byrne, senior vice president and Asia regional credit officer for Moody’s, told the Reuters Japan Investment Summit. But implementation will be key and lack of fiscal discipline, or some adverse external shock, such as a double dip in the global economy could place its credit rating under pressure, said Byrne, speaking via video conference from Shanghai.  

"I think the balance of risks, even though we have a stable outlook, could shift to the negative side if this plan is not followed," he said. In May 2009, Moody’s raised Japan’s domestic-currency debt rating to Aa2 from Aa3. The outlook for the rating is stable.


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