S&P cuts Japan’s credit rating to ‘AA-‘

In a move that sent jitters across global markets yesterday, leading rating agency Standard & Poor's (S&P) has cut its credit rating on Japan, the Asian economic giant and the world's third-largest economy, to its fourth-highest ranking 'AA-' alongside with neighbouring China.

The lowering of Japan's long-term sovereign credit rating by a notch to 'AA-' from 'AA' was mainly due to the country's high fiscal deficits that was expected to remain high in the next few years, and political issues.

Japan's previous rating cut by S&P was nine years ago, when the country lost its highest 'AAA' rating following the 2001 recession.

Nevertheless, the outlook on long-term rating remains stable as the country's external balance sheet remains strong and monetary flexibility partially offset the fiscal flexibility, S&P said.

The agency affirmed the 'A-1+' short-term credit ratings, and also the transfer and convertibility (T&C) assessment at 'AAA'.

S&P believes that the Japan's Democratic party-led government lacks a ''coherent strategy'' to address the negative aspects of the country's debt problems.