Forex Marketz Daily Forex News – Fully Markets Update
Abenomics losing steam: S&P downgrades Japan ratings
TOKYO — Standard & Poor’s lowered Japan’s credit ratings Wednesday, citing a lack of confidence in Prime Minister Shinzo Abe’s economic policies.
“We believe the likelihood of an economic recovery in Japan strong enough to restore economic support for sovereign creditworthiness commensurate with our previous assessment has diminished,” the U.S.-based ratings agency said. “Despite showing initial promise, we believe that the government’s economic revival strategy — dubbed Abenomics — will not be able to reverse this deterioration in the next two to three years.”
S&P lowered Japan’s long-term foreign and local currency unsolicited sovereign credit ratings from AA- to A+. The outlook, the agency said, “is stable.” The short-term foreign and local currency unsolicited sovereign credit ratings were lowered from A-1+ to A-1. The transfer and convertibility assessment was revised from AAA to AA+.
Olivier d’Assier, Asia-Pacific managing director at Axioma, a U.S. provider of risk management tools, said he does not expect the downgrade to cause panic in the market. “People have already offloaded risk assets and have a lot of cash in their portfolios,” he said. “The Bank of Japan is firmly behind its goal of 2% inflation and is continuing quantitative easing. Selling now is not necessarily a necessity.”
On the subject of Abenomics, d’Assier said: “Prime Minister Abe has not been able to turn consumer sentiment around enough. But Abenomics is the best effort in 20 years to get out of stagflation, and there aren’t many other games in town.”
In d’Assier’s view, credit rating agencies are trying to stay a step ahead of events. “After being late calling the subprime issue before the financial crisis, they are trying to regain their reputation by calling the obvious before it happens.”
