S&P lowers Japan credit rating as recovery prospects dim

AP News
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Posted: Sep 16, 2015 7:28 AM

TOKYO (AP) — Standard & Poor's lowered Japan's sovereign credit rating on Wednesday and said it doesn't expect Prime Minister Shinzo Abe's economic revival strategy to reverse deteriorating government finances within the next three years.

The credit rating agency lowered the long-term credit rating to A+ from AA- and said its outlook was stable, meaning further changes to the rating are unlikely in the near to medium term.

A credit rating downgrade can raise the cost of borrowing overseas for governments but Japan is largely insulated as most state debt is in local hands.

S&P said Japan is unlikely to experience an economic recovery strong enough in the next few years to restore its sovereign credit rating to earlier levels.

Average income has declined to $36,000 from $47,000 between 2011 and 2014 which reflects the falling value of the yen versus the dollar and weak economic growth.

Japan's government debt relative to the size of its economy is among the highest for developed countries.

The economic blows of the 2008 global financial crisis and the 2011 earthquake have depressed government revenue but spending has continued to increase, partly because of an aging population, S&P said.

It projects general government debt to increase by the equivalent of 5 percent of gross domestic product each year from 2015 to 2018.

S&P said Japan's fiscal weakness is balanced by the country's political stability, relatively prosperous economy, stable financial system and net creditor status in relation to foreign countries.