Standard & Poor’s has issued Japan a downgrade for its credit rating on rising sovereign debt, which is the first blow to the country’s rating in almost a decade and serves as a warning to other debt-burdened, wealthy nations, according to Reuters. On Thursday, S&P announced that it had decided to lower Japan’s long-term sovereign debt rating to AA-, which is down one notch to the fourth highest level. The agency pointed to the huge public debt - which is double the size of its $5 trillion economy - for the downgrade, and also pointed to persistent deflation, and an aging population.
The downgrade from S&P highlighted the global concern over debts, and Julian Jessop of Capital Economics warned that even the leading Japanese economy would need to improve its fiscal standing or “further downgrades will surely follow.” The S&P report summarized that various factors suggest that government debt ratios “will continue to rise further than we had envisaged,” only peaking “in the mid-2020’s.” Jessop said the rating cut “supports our fear that 2011 could be the year when Japan’s dire fiscal position finally impacts financial markets both at home and abroad.”
