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S&P Threatens Lower Rating on Japanese Sovereign Debt

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Uploaded on Apr 27, 2011

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Credit rating agency Standard & Poor's has lowered the outlook on Japanese sovereign debt because of the massive cost of rebuilding after last month's quake. Tokyo's fiscal deficit is estimated to be 3.7 percent of the country's GDP through 2013.

Rating agency Standard and Poor's threatened to cut Japan's sovereign debt rating on Wednesday (April 27) over quake costs, although Japan said it would continue to work to maintain trust in Japanese debt.

S&P affirmed its long-term rating on Japan at AA minus, but cut the outlook from stable to negative.

The credit rating agency cut Japan's rating in January for the first time since 2002. It says costs related to the March 11 earthquake, tsunami and ensuing nuclear power plant crisis will increase Tokyo's fiscal deficit above prior estimates. It's expected to be a cumulative 3.7 percent of the country's GDP through 2013.

Japanese Chief Cabinet Secretary Yukio Edano says that the government will work to maintain trust in government bonds even with the expected costs incurred in the rebuilding process.

[Yukio Edano, Chief Cabinet Secretary]:
"While we are still in a situation where there are many things that still need to be dealt with, we have consistently worked since the disaster to maintain trust in Japanese Government bonds. We plan on also working to maintain trust in Japanese bonds going forward as well."

The yen dipped shortly after the announcement with the dollar climbing to an intraday high of 81.781 yen, with the Nikkei 225 average holding gains.

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