Standard and Poor’s ratings agency cut its outlook for Japanese government debt on Tuesday, citing reduced wiggle room on fiscal policy and voicing disappointment with the new government’s budget consolidation plans.
S&P cut its outlook on Japan’s long-term sovereign debt rating to negative from stable, while maintaining its AA long-term and A-1+ short-term local and foreign currency sovereign credit ratings.
“The outlook change reflects our view that the Japanese government’s diminishing economic policy flexibility may lead to a downgrade unless measures can be taken to stem fiscal and deflationary pressures,” the agency said in a statement. “Moreover, the policies of the new Democratic Party of Japan (DPJ) government point to a slower pace of fiscal consolidation than we had previously expected.”
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