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185668
Tue, 05/31/2011 - 18:42
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https://oananews.org//node/185668
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Moody's to review Japan debt rating for possible downgrade
TOKYO (Kyodo) - Moody's Investors Service Inc. took a further step Tuesday toward cutting its credit rating on Japanese government bonds, saying it will review the current Aa2 rating for a possible downgrade because of concerns that Tokyo will be unable to reach a credible deficit reduction goal.
The decision came amid the prospect that the economic and fiscal impacts from the March 11 earthquake and tsunami, which are believed to be more serious than initially thought, could add to the country's woes while it has yet to fully recover from the global financial turmoil, the U.S. rating agency said in its report.
The review process normally takes around three months before Moody's decides on any rating action, it said.
The process has two main focuses, said Thomas Byrne, senior analyst at the agency's sovereign risk unit. ''The first is an assessment of the scope, effectiveness, timeliness'' of the social security and tax reform plans that the government is planning to announce in June as part of its efforts to restore the nation's fiscal health, the worst among developed economies.
Secondly, ''we'll try to get a better idea of the near- and long-term fiscal costs and economic consequences of the March 11 earthquake,'' Byrne told a press conference, adding he will check whether the government will be forced to bear ''contingent liabilities'' linked to Tokyo Electric Power Co., which might ''pose costs for taxpayers.''
The government has compiled a policy package to financially support the utility company facing huge compensation claims in the wake of the crisis at its tsunami-ravaged Fukushima Daiichi nuclear power plant.
The Moody's report said that ''a weak or delayed reform program coupled with continued weak economic growth prospects would put greater downside pressure on the rating and reduce the probability that it could remain in the Aa range.''
In February, Moody's lowered the outlook for its Aa2 rating -- the third highest -- on Japanese sovereign debt to ''negative'' from ''stable.''
On the government's reform efforts, the report said, ''Japan's divided Diet (in which opposition parties control the upper house) and the intensifying level of political challenges to Prime Minister (Naoto) Kan together continue to threaten to bog down such efforts.''
The decision came amid the prospect that the economic and fiscal impacts from the March 11 earthquake and tsunami, which are believed to be more serious than initially thought, could add to the country's woes while it has yet to fully recover from the global financial turmoil, the U.S. rating agency said in its report.
The review process normally takes around three months before Moody's decides on any rating action, it said.
The process has two main focuses, said Thomas Byrne, senior analyst at the agency's sovereign risk unit. ''The first is an assessment of the scope, effectiveness, timeliness'' of the social security and tax reform plans that the government is planning to announce in June as part of its efforts to restore the nation's fiscal health, the worst among developed economies.
Secondly, ''we'll try to get a better idea of the near- and long-term fiscal costs and economic consequences of the March 11 earthquake,'' Byrne told a press conference, adding he will check whether the government will be forced to bear ''contingent liabilities'' linked to Tokyo Electric Power Co., which might ''pose costs for taxpayers.''
The government has compiled a policy package to financially support the utility company facing huge compensation claims in the wake of the crisis at its tsunami-ravaged Fukushima Daiichi nuclear power plant.
The Moody's report said that ''a weak or delayed reform program coupled with continued weak economic growth prospects would put greater downside pressure on the rating and reduce the probability that it could remain in the Aa range.''
In February, Moody's lowered the outlook for its Aa2 rating -- the third highest -- on Japanese sovereign debt to ''negative'' from ''stable.''
On the government's reform efforts, the report said, ''Japan's divided Diet (in which opposition parties control the upper house) and the intensifying level of political challenges to Prime Minister (Naoto) Kan together continue to threaten to bog down such efforts.''
