Standard and Poor’s said Japanese Prime Minister Yoshihiko Noda’s administration hasn’t made progress in tackling the public debt burden, an indication it may be preparing to lower the nation’s sovereign grade.
“Japan’s finances are getting worse and worse every day, every second,” Takahira Ogawa, Singapore-based director of sovereign ratings at S&P, said in an interview Thursday. Asked if this means he’s closer to cutting Japan, he said it “may be right in saying that we’re closer to a downgrade. But the deterioration has been gradual so far, and it’s not like we’re going to move today.”
S&P rates Japan at “AA-” and has had a negative outlook on the rating since April. Ogawa said Japan needs a “comprehensive approach” to containing its debt burden, which the government projects will exceed 1 quadrillion yen ($13 trillion) in the year through March as the nation pays for reconstruction costs from March’s record earthquake.
Japan’s lower house of parliament Thursday approved legislation that would add an additional 2.1 percent levy to an individual’s annual payment. Lawmakers revised the government’s proposal to extend the period of the measure to 25 years, from 10 years, to help pay for earthquake rebuilding. The measure takes effect in 2013.
“Just because this passes doesn’t mean that it’s positive for public finances,” Ogawa said. “Politicians are squabbling over the minute details, while avoiding what’s most important.”
While Japan’s policy makers have signaled they will double the nation’s sales tax from 5 percent by around 2015, a bill has yet to be enacted.
Moody’s Investors Service cut the nation’s debt rating by one step to “Aa3” on Aug. 24. S&P lowered Japan to “AA-” in January. Fitch Ratings also has Japan at “AA-” with a negative outlook.
