Moodys downgrades Japanese bonds to Aa3, due to huge and increasing amount of public debt and large budget deficits.


via ムーディーズ、日本国債を格下げ 1段階低い「Aa3」  :日本経済新聞.

Moody’s said it was cutting Japan’s government bond rating to Aa3 from Aa2, citing “large budget deficits and the build-up in Japanese government debt since the 2009 global recession.” It said the outlook was stable. The action puts Moody’s rating on a par with other major ratings companies Standard & Poor’s and Fitch Ratings, both of which rate Japan’s sovereign debt at AA- with a negative outlook.

The yen fell briefly on the news, with the dollar spiking to Y76.78

Like the U.S., Japan is facing increasing criticism over its financial condition, bringing action from the ratings companies. But its finances are in far worse shape with nearly half of the annual central government budget financed by bond issuance and the country’s gross debt now equal to more then 200% of annual GDP. That compares with a U.S. debt load at an estimated 75% of GDP.

via Moody’s Downgrades Japan Debt Rating To Aa3: Nikkei

Japanese Finance Minister Yoshihiko Noda declined to comment on the Moody’s move, but he defended the creditworthiness of Japanese sovereign debt. “The smooth sales of Japanese government bonds at recent auctions show that confidence remains unshaken,” Noda told reporters after the downgrade.

Readers may wish to compare this completely unbiased and objective view with this one from economic analyst Mish regarding a bond auction in early August:

Please note that was not a failed auction. Indeed it was oversubscribed. However, nearly all of that demand is internal. Internal demand is a double-edged sword. Right now it is still sufficient. However, when (not if), Japan ever needs foreign buyers for its bond market, rates will not be 2.3% on 40-year bonds.

Related articles:

  1. 2011/08/23 17:32 – ‘Bond Vigilantes’ Sizing Up Prime Minister Hopefuls

  2. Japanese debt now 7,380,000 per person 「国の借金」最大の943兆円 6月末、1人あたり738万円  :日本経済新聞 
  3. Mish’s Global Economic Trend Analysis: Worst Demand on Record for Japanese 40-Year Bonds; Can Japan Service its Debt? How?

  4. Markets Hope For Follow-Through On Taxes, Yen From New Govt
  5. DPJ Contest To Be Fought Over Rebuilding, Tax Hikes