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Azumi worried about Japan's debt rating after EU downgrades

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why is Japan frightened NOW? As a matter of fact Japan was the first major country whose credit rating was lowered to the lowest level by Moody's that too years ago.

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He should be worried.

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I'm not an economist, or even pretend to be one, and while I understand the situation is dire in Japan, with its amount of debt etc., how the US with an even bigger amount of debt, and with unemployment and their current economic situation be above all of this amazes me. I keep hearing that most of Japan's debt is held by it's own people where as US debt is held by the Chinese, Saudis and Japan. That must make a huge difference doesn't it?

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it will be us next time

Not "may" or "would", it "WILL" be Japan next time.

Solidarity is much needed now to fix the sovereign debt crisis of Japan. If nothing are done, Japan will be again down graded to a junk bond status, and a Japanese bond becomes a worthless paper. Who owns these bonds? Japanese citizens.All your hard work and savings will be gone Saynara. It is very critical to keep a house in order. Spending cut and tax hike are unavoidable.

Gambare, Japan. I am confident you can achieve this goal. Save your country. Restore your country before you think about your own self interest. Yes, YOU CAN!!

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...it will be us next time."

Suppose August 2011 never happened. Aa3 to A1 = investment grade (upper medium grade w/low credit risk). In other words, the world won't end if and when it does happen, 'cause there's a whole lot of countries out there that's a hell of a lot riskier to place your money at than Japan.

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People forget that Japan was the No#2 economy in the world for 25 years. Only recently they were displaced by China which was having a bubble and has 10 times the population. So Japan is not in as bad a situation as some people would like to make out.

The Japanese Government may be hailed as zero-growth economic sustainability geniuses in the years to come.

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I doubt Japan has much to worry about. The euro downgrades happened not long after the Chinese said they'd like an alternative to the US dollar as a basic reserve currency. They started talking about shifting their overseas US$ denominated investments into euro-denominated ones. By strange coincidence the US-based rating agencies then started to grumble about the structural weaknesses of the euro zone. And now the crisis. The Chinese haven't said they would prefer yen-denominated reserves. If they do, watch out Japan. But until then, the US will keep sending out its rating agencies to hunt down the euro. The US fears nothing more than losing the US$ standing as the international reserve currency. Without that, the US economy goes down the hole faster than Greece's.

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Who is Standard & Poor anserable to? No one and they can destroy a whole country's credibility on one word, they need to be answerable to someone or some type of body.

I find their ratings to be very dubious and can't see why they should carry any weight.

Standard & Poors ratings are very Poor.

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Japan has to stop working with western economic models born in the Reagan Thatcher era. Japan has the biggest savings in the world, It does not need to borrow as other counties do so the credit rating thing is not so much an issue. If Japan does not make policies for Japan it will end up with the same problems as the US and Europe. The policy makers really don't understand the issues. In Japan or anywhere else for that matter.

For example what were the Europeans thinking when they allowed all nations in the EEC to write sovereign debt at the same rate as the prime members like Germany? They abolished the exchange rates and brought everyone to par. Something had to give. That something is giving now.

Japan has a problem with its exchange rate against other currencies because it is making Japanese goods uncompetitive. What Japan needs to do is "PRINT MONEY". Japan can afford to. In a depressed economy such as Japan over the past 20 years money should not be a scarcity it should be freely available. For so many years the world economists have thought inflation is the bogey-man. The crap that's taught in business schools around the world is the problem that coupled with central bank intervention and dabbling when they don't really know what they are doing.

Stop the vested interests in "Old Money" models and think for yourselves for a change.

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Rating agencies are businesses into making money.

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Raising taxes, particularly on consumption will hurt Japan's economy.

Since Japan's debt is mostly held by its people, over 70%, and the interest is basically zero, it really has little debt pressure.

Japan needs to grow its tax base through stimulating investment in Sendai, other quake damaged areas, and in providing an environment favorable to business growth. Japan needs to act in amore open and cooperative way internationally by understanding foreign countries it's companies operate in culturally, and just promote Japanese only talking to Japanese.

Finally, Japan's corporations need to simplify their structures, speed up and improve decision-making. Also, the layers of middlemen need to be consolidated.

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I agree with teesquared & wnagler1.

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So they should immediately stop wasteful spending. They won't, though... this will just be more fuel for the 'raise tax' fire they're quickly trying to start.

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Azumi, instead of worrying, start doing something. And no, not selling the yen. You've wasted enough of our tax money as it is.

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@ironchef, without selling yen like they did, yen would be around 50-60 yen today and hurting Japanese exporting business. . There have been global currency terrorists using computers with "buy" and "sell" keyes. Some of them (if they are any good) make millions within one day. FYI

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Japan doesn't have to sell any yen, just print more of it which will effectively devalue the Yen on world markets without being left with a pocket full of useless $ denominated bog paper!

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The longer end of the USD interest rate curve indicates that the "Prime Debt" US treasury bills are trading at a premium to interest rate swaps. This means that the credit worthiness of Uncle Sam is below that of a regular commercial banks for those longer periods 25years and beyond. Just copying the US model is therefore wrong because Uncle Sam is already bankrupt.

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globalwatcher, yen would not be at 50-60 today if Japan didnt sell the yen. Come on, get real! Japan doesnt have the monetary power to fight against all these counterparts.

these "currency terrorists" are no more than big money selling weaker currencies and putting their money into the yen as it is backed by so much savings. i would do the same thing.

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These rating agencies should go to hell. They manipulate the whole world.

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Foxie I whole heartedly agree .

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Teesquared, I'd say governments are above swaps because of liquidity, not credit risk. Swaps have a short term credit risk of about 3 months, they aren't a 25 year agreement with a single bank. Japan's big problem is an aging population. A baby boom or relaxed immigration would make the tax projections rosier.

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Europeans will demand Japan is downgraded. All of Europe's ancient hatreds are revived when their economies falter.

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Aqualung.

Currently the yield on the 30 year US long bond is around 2.91pct. 30 yr interest rate swap by comparison is around 2.64. That's a 27 basis point adjustment.

Swaps have potential maturities up to 50 years longer than the bond. Both have coupons and have credit and market risk built into the price just as long bonds do.

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@JeremiahW:

Europeans will demand Japan is downgraded. All of Europe's ancient hatreds are revived when their economies falter.

Are you sure that it's a European thing? I don't think so. Backbiting is global. The three big rating agencies are US agencies. Therefore, they act to boost their own economic situation in the US (which is not necessarily good for the US either). Still, they have a clear tendency to see economics one-sided and biased, since they would lose their importance if the US dominance were reduced. They grab whatever helps them to maintain their status. Take this as comparison: http://www.telegraph.co.uk/finance/china-business/7886077/Chinese-rating-agency-strips-Western-nations-of-AAA-status.html Everyone manipulates the world economy as she can.

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Since Japan's debt is mostly held by its people, over 70%, and the interest is basically zero, it really has little debt pressure

wnagler1 -- huh? What do you call the massive debt service costs that Japan must face every year? One of the largest, if not the largest item, in the Japanese budget is repaying the debt which forces it to borrow more money and cut corners on needed social spending, and, now, finally, raise taxes. By what definition is that not pressure? The posters like yourself who think that because most of the current debt is held internally is somehow a silver bullet for Japan are really missing the point. Debt is debt, no matter who holds it. Besides, no foreign investors would buy Japanese debt, due to its low return. Only unsophisticated investors -- the Japanese public willing to put their money into Japan Post for basically zero interest -- are saving Japan in the short term. And with their numbers shrinking, this model is breaking down -- fast.

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Teesquared We have a difference of opinion of how the swap markets work. A 30 year swap clearly doesn't include a 30 year default assumption with a single AA company or it wouldn't be used for a risk free proxy.

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