johngaltfla.com / by John Galt / December 1, 2014 04:45 ET
Uncertainty over the future of the Japanese economy spurred on by the political dysfunction has triggered an action within the past hour which has sent a shudder through the Japanese financial system and apparently highlights a new more aggressive approach by the ratings agencies to once again warn before economic instability instead of after the fact as was the case in 2008. This downgrade is being viewed by some in Japan as an attempt to sway the upcoming elections called for by Prime Minister Abe but in reality it appears to reflect the logical outcome of years of failing Abenomics policies which are doing nothing more than to increase Japan’s debt load.
Here is the full statement from Moody’s website:
Rating Action: Moody’s downgrades Japan to A1 from Aa3; outlook stable
Global Credit Research – 01 Dec 2014
Singapore, December 01, 2014 — Moody’s Investors Service today downgraded the Government of Japan’s debt rating by one notch to A1 from Aa3. The outlook is stable.
The key drivers for the downgrade are the following:
1. Heightened uncertainty over the achievability of fiscal deficit reduction goals;
2. Uncertainty over the timing and effectiveness of growth enhancing policy measures, against a background of deflationary pressures; and
3. In consequence, increased risk of rising JGB yields and reduced debt affordability over the medium term.
The A1 rating reflects the government’s significant credit strengths, including a large, diverse economy with a strong external position, very high institutional strength and a very strong domestic funding base.