S&P Adds Concern About Japanese Fiscal Health Improving

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.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza
Alfonso Esparza

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