S&P Retains Japan's Rating At 'AA-'

Standard and Poor's on Monday retained sovereign ratings of Japan with "negative" outlook. The net external asset position, relatively strong financial system, and diversified economy were the factors that supported the credit ratings.

It affirmed Japan's long- and short-term sovereign credit ratings at 'AA-' and 'A-1+', respectively.

However, ratings are constrained by the government's weak policy foundations, large fiscal deficits, and high debt, as well as prolonged deflation and an aging and shrinking workforce.

S&P expects fiscal flexibility to continue to diminish. Parliamentary approval of government plans to raise the consumption tax may reduce revenue shortfalls. But it will not solve the structural problems of Japan, it said.

Further, the negative outlook suggests that downgrade is likely if medium-term growth prospects for real GDP per capita fall from the current projection of 1.2 percent. However, the agency may revise the outlook to stable if the government were to implement robust and sustainable fiscal consolidation. (Provided by RTTNews)