Moody's upgrades Japan's debt rating
TOKYO (AFP) — Moody's Investors Service on Monday upgraded Japan's domestic debt rating for the second time in nine months on expectations of continued fiscal reform and an economic recovery.
Moody's upgraded its rating on Japan's local-currency government bonds by one notch to Aa3, its fourth-highest ranking, meaning the government has an extremely strong capacity to repay its borrowings.
The upgrade "was prompted by expectations of continued fiscal restraint and consolidation, coupled with an easing-out of the debilitating effects of deflation," Moody's senior vice president Thomas Byrne said.
In October the agency had upgraded the rating for the first time since it began coverage of Japan in 1993, by putting the country in the top Aaa band.
The agency gradually slashed the rating as Japan sank into a long period of recession and deflation in the 1990s, prompting the government to inject trillions of yen into the economy to try to stimulate growth.
Successive governments have aimed to slash spending to rein in a debt which is the largest among major industrial nations at about 180 percent of gross domestic product, according to the Organisation for Economic Cooperation and Development.
The government of Prime Minister Yasuo Fukuda, a centrist political veteran who took office in September, looks "firmly committed to fiscal consolidation," said Byrne.
The upgrade was also due to expectations that "although economic growth may slow this year, the Japanese economy will prove resilient to turbulence in the global economy," he said.
Inflation has moved into positive territory but remained relatively tame compared with other major industrial countries, he said.
Japan's banking system was also in relatively sound health, having avoided the worst of the fallout from a global credit crisis.
"The government's commitment to continue a policy of fiscal consolidation, mainly through public infrastructure and local government expenditure cutbacks, has placed the budget on a gradually improving trend," said Byrne.
Japan's economy is on the mend after a slump stretching back more than a decade, but sluggish consumer spending has raised concern that the country's export-led recovery is vulnerable to the global economic slowdown.
Moody's left unchanged its top Aaa foreign currency rating for Japan.
