Moody's did it in the last December, S&P is doing it now: they have lessened hopes about the recovery of the economy of Japan. Japan got an A+ instead of the better AA-, closer to the top AAA rating. This is the first downgrade from S&P since January 2011, and the insight is negative instead of stable. S&P says that Japan, despite its efforts, wouldn't make the recovery strong enough to keep its AA- and also, in the two or three upcoming years, Japan won't be able to reverse this deterioration since then, even if government tries to revive the economy. What do you think of the Japan getting a less good rating? And the fact the rate only changed now while the other years was enough to keep AA-?
I'm surprised that Japan kept a AA- rating for so long, to be honest. The government's balance sheet hasn't been that great for a while, even if the cash on corporate balance sheets is very high. The consistent buying up of JGBs that yield very little by the public has allowed the government to get away with maintaining an unhealthy status quo. It's a country in secular decline, with an aging workforce and an inability to restructure the economy onto a long-term growth path. Abenomics sounded like a good concept but years of neglect are coming back to haunt the country.
To be honest, that feels a bit surprising since Japan has a powerful workforce that feels more ready to work than any country. I remember when companies forced the Japanese people to take more holidays because in general they weren't doing enough, it means they succeeded to have a lot of workforce without involving more people. This is what some West countries dream of. But certainly not what I'm dreaming of. But are we not getting the downside of it? I mean, this rate isn't somehow unsustainable? You're talking about aging workforce, and it remembers me that the importance of work is mutually exclusive with the fact of getting more children, if I remember correctly. Do you think it plays here? Or it is rather a government fault's on the economy side, mainly, and not as a whole?
Watching the business news airing on NHK, comments suggest to me that the central bank of Japan is very concerned that Yellen and company wI'll be raising the rate about 14 hours from now. It apparently won't help Japan's situation.
The downgrade is quite a blow to the Prime Minister's plans to spur growth in the struggling Japan economy and to the theory of Abenomics. While there was some sort of headway early on, I think the impending Fed Reserve interest rate hike it dealing quite a significant blow to the economy and the inputs of the growth model. The slowing Chinese economy, also places a dampener on Japan's production output figures. When you think about long term ratings, agents express an opinion about the level of risk expected to remain inherent within a country for a period longer than a year. With both the external factors mentioned above expected to continue on their current trajectories, it does fuel for a large cause of concern for Japan.
I'm not sure why you talk about Federal Interest hike? You are talking about the long term hike that will happen one day and so it influences the Japan growth, even if it wasn't yesterday? I mean, Fed said yesterday that the interest rate will be kept for now, just for your information. Meanwhile, a slowing down China economy is often better for Japan, since, from what I understood, the fact China's slowdown seems temporary seems to influence the S&P's rating devaluation to A+. So I am not sure to get it. If you could explain further your point of view, that would be cool!
