Standard & Poor’s on Tuesday cast doubt on Prime Minister Shinzo Abe’s ability to repair Japan’s tattered finances less than two weeks away from a snap election, after Moody’s downgraded the country’s sovereign debt rating.
Abe’s decision to delay a sales tax increase by 18 months may help the economy in the short term, but there is still no guarantee taxes will rise because the political dynamic could change after the election, Takahira Ogawa, director of sovereign ratings at S&P, told Reuters.
The growing reservations about Japan come at an awkward time for Abe as he has called an election on Dec. 14 that has become a vote on whether he has done enough to fundamentally improve the prospects for growth.
“I might be wrong, but judging by history I’m not optimistic about getting a detailed fiscal plan,” Ogawa said.
“In addition, if the government fails to implement its plan, then it doesn’t make any sense.”
S&P has an AA- rating on Japan, which is three notches from the top rating of AAA. S&P’s rating on Japan has a negative outlook, meaning a downgrade is possible.
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