Japan’s government is less creditworthy today than last month, according to Moody’s Investors Service. The bond market doesn’t believe it.
Japan’s five-year yield fell to a record low two days after Moody’s cut the nation’s debt rating one level to A1 on Dec. 1, while 10-year notes have rallied. The Bank of Japan’s decision to expand record bond-buying is helping drive yields lower after the downgrade.
While Moody’s cited doubts over Prime Minister Shinzo Abe’s reflation campaign, the first two years of his policies have yielded record corporate earnings and household wealth, providing a growing pool of private assets to underpin public borrowing. Opinion polls show Abe will be returned to power in an election this weekend with a stronger mandate than the one he received in 2012.