A leading ratings agency has downgraded its outlook for Japan’s sovereign debt on concerns over the country’s massive reconstruction costs in the wake of the Mar. 11 disaster, according to Financial Times. On Wednesday, Standard & Poor’s lowered its outlook for Japan’s debt from “stable” to “negative,” citing an estimate of reconstruction costs that ranges from ¥20,000 billion to ¥50,000 billion that would increase fiscal deficits. The agency also warned that providing a clear plan for the payment of those costs would be difficult.
In a statement, S&P said, “The negative outlook signals that a downgrade is possible if Japan’s public finances weaken further over the next two years in the absence of fiscal consolidation to offset them.” The ratings agency has forecast that costs from the disaster will boost Japan’s fiscal deficit by 3.7% on top of prior estimates. Estimates of reconstruction costs from Japan are substantially lower at ¥10,000-30,000 billion, and a government official said leaders would “work to maintain confidence in Japan’s government bonds.”