ID :
210298
Thu, 09/29/2011 - 17:25
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Shortlink :
https://oananews.org//node/210298
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Japan gov't bond downgrade inevitable without 'credible' plan: S&P
TOKYO, Sept. 29 Kyodo - Further credit downgrade for Japanese government bonds will be unavoidable unless Tokyo ensures a ''credible and sustainable'' fiscal reform plan and political stability, the chief analyst on the country's debt at Standard & Poor's said Thursday.
Takahira Ogawa, director at S&P's sovereign and international public finance ratings, also said the U.S. rating agency has maintained the ''negative'' outlook for Japan's AA-minus long-term credit rating, despite a provisional tax hike plan recently proposed by the government.
A negative impact on the Japanese economy and finances from the March earthquake and tsunami seems less damaging than earlier thought, Ogawa said in an interview with Kyodo News. But he also said the government must ''make clear...how it can achieve fiscal restoration in the medium term,'' urging a ''credible and sustainable'' plan.
In January, the S&P cut Japan's rating by one notch from AA, pointing to the government's lack of a coherent approach to rehabilitating its fiscal health, the worst among major developed countries, with the outstanding long-term central and local government debt approaching 200 percent of gross domestic product.
The agency in April lowered the outlook from ''stable,'' citing a likely increase in the nation's budget deficits due to reconstruction work following the March 11 earthquake-tsunami disaster. The move indicates there is a one-third chance of a credit downgrade in the next two years.
One of the biggest downside risks to Japan's rating, Ogawa said, is political instability, represented by the divided Diet where opposition parties control the upper house, as well as by revolving-door prime ministers.
Under the current political situation, ''it is nearly impossible for any government to create long-term policy,'' he said.
Yoshihiko Noda, Japan's sixth prime minister in five years who took office earlier this month, is leading the government in a refreshed mood and may be able to start something new, the analyst said, but warned that Noda, a fiscal hawk inclined toward raising taxes, must go ahead with his policy in a way that would not hurt voters' confidence.
Japan must hold its next general election in 2013 at the latest.
As for reconstruction following the March disasters, Ogawa said the government must make quick responses, including emergency spending on necessary projects. ''We're watching whether the ruling and opposition parties could achieve any consensus that would remain a basis even after the country again has a new prime minister,'' he said.
The government and Noda's Democratic Party of Japan are now working on a third extra budget for fiscal 2011 that could amount to some 12 trillion yen. They also proposed Tuesday a 10-year tax hike plan to raise up to 11.2 trillion yen for reconstruction, estimated to cost some 19 trillion yen in the initial five-year period.
Noda has called for fiscal restraint, seeking to issue special government bonds that would be serviced only with proceeds from the provisional tax hike, a step the premier says would prevent the government from leaving future generations with additional burdens on the existing 900 trillion yen public-sector debt.
Takahira Ogawa, director at S&P's sovereign and international public finance ratings, also said the U.S. rating agency has maintained the ''negative'' outlook for Japan's AA-minus long-term credit rating, despite a provisional tax hike plan recently proposed by the government.
A negative impact on the Japanese economy and finances from the March earthquake and tsunami seems less damaging than earlier thought, Ogawa said in an interview with Kyodo News. But he also said the government must ''make clear...how it can achieve fiscal restoration in the medium term,'' urging a ''credible and sustainable'' plan.
In January, the S&P cut Japan's rating by one notch from AA, pointing to the government's lack of a coherent approach to rehabilitating its fiscal health, the worst among major developed countries, with the outstanding long-term central and local government debt approaching 200 percent of gross domestic product.
The agency in April lowered the outlook from ''stable,'' citing a likely increase in the nation's budget deficits due to reconstruction work following the March 11 earthquake-tsunami disaster. The move indicates there is a one-third chance of a credit downgrade in the next two years.
One of the biggest downside risks to Japan's rating, Ogawa said, is political instability, represented by the divided Diet where opposition parties control the upper house, as well as by revolving-door prime ministers.
Under the current political situation, ''it is nearly impossible for any government to create long-term policy,'' he said.
Yoshihiko Noda, Japan's sixth prime minister in five years who took office earlier this month, is leading the government in a refreshed mood and may be able to start something new, the analyst said, but warned that Noda, a fiscal hawk inclined toward raising taxes, must go ahead with his policy in a way that would not hurt voters' confidence.
Japan must hold its next general election in 2013 at the latest.
As for reconstruction following the March disasters, Ogawa said the government must make quick responses, including emergency spending on necessary projects. ''We're watching whether the ruling and opposition parties could achieve any consensus that would remain a basis even after the country again has a new prime minister,'' he said.
The government and Noda's Democratic Party of Japan are now working on a third extra budget for fiscal 2011 that could amount to some 12 trillion yen. They also proposed Tuesday a 10-year tax hike plan to raise up to 11.2 trillion yen for reconstruction, estimated to cost some 19 trillion yen in the initial five-year period.
Noda has called for fiscal restraint, seeking to issue special government bonds that would be serviced only with proceeds from the provisional tax hike, a step the premier says would prevent the government from leaving future generations with additional burdens on the existing 900 trillion yen public-sector debt.
