Friday, November 25, 2011

The Other Huge Elephant: S&P Threatens Japan Downgrade

This is te other, rather huge elephant in the room: S&P ratings agency hasn’t made progress in tackling the public debt burden.
Ogawa, director of sovereign ratings at S&P in Singapore, said that “Japan’s finances are getting worse and worse every day, every second,”. On downgrade: “may be right in saying that we’re closer to a downgrade. But the deterioration has been gradual so far, and it’s not like we’re going to move today.”

Bloomberg reports: "A reduction in S&P’s AA- rating would be a setback for Noda, who took office in September and has pledged to both steady Japan’s finances and implement reconstruction from the nation’s record earthquake in March. It’s unrealistic for Japan to think it can escape the debt woes that have engulfed nations overseas unless it can control its finances, according to Ogawa.

While Japan has enjoyed borrowing costs at global lows for its debt, the International Monetary Fund said in a report released on its website yesterday there’s a risk of a “sudden spike” in yields that could make the debt level unsustainable. Japanese government bonds fell after Ogawa’s remarks, sending 10-year yields to the highest level in three weeks".

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