Moody's cuts Japan's sovereign debt rating to Aa3

[ASH]

Rating agency Moody's has cut Japan's long-term sovereign debt rating citing concerns about the size of the country's deficit and borrowing levels.

At least this might help the Japanese control the rising foreign exchange value of the yen.



More from Reuters:

Aug 24 (Reuters) - Moody's Investors Service on Wednesday cut the rating on Japan's government debt by one notch to Aa3, blaming large budget deficits and the build-up of debt since the 2009 global recession.

The agency had warned in May that it may downgrade Japan's Aa2 rating due to heightened concerns about its faltering growth prospects and a weak policy response to deal with a bulging public debt, now twice its $5 trillion GDP.

"Several factors make it difficult for Japan to slow the growth of debt-to-GDP and thus drive this rating action," Moody's said in a statement, adding that the March 11 earthquake and ensuing nuclear crisis had exacerbated Japan's problems.

Still the ratings agency said the outlook was now stable given the "undiminished home bias of Japanese investors and their preference for government bonds, which allows the government's fiscal deficits to be funded at the lowest nominal rates globally."

The yen moved little on the news, trading at around 76.7 against the dollar. (Guess not.)

The downgrade brings Moody's rating for Japan in line with rival agency Standard & Poor's, which cut the country in January to AA, the fourth highest on its scale.

Persistent deflation and slow growth has shackled Japan's economy for years, reducing tax revenue available to the government, which has grown to rely on debt issuance to finance a large portion of its budget.

[thunderdownunder]

Re: Moody's cuts Japan's sovereign debt rating to Aa3

Moody's - really - when your a bum kissing sycophant who is paid for service- to go out and kick a country that is truly down just shows how bereft of true morals they are. Japan at least could sell Its US treasuries and totally screw the USA in an Instant. They just feel an obligation for what is past so they don't.
Time for a World reserve Currency based on G7 or G20 basket. Moody's is as irrelevant as spilled milk.

[dcarrigg]

Re: Moody's cuts Japan's sovereign debt rating to Aa3

The yen moved little on the news, trading at around 76.7 against the dollar. (Guess not.)

Can someone explain to me why a major sovereign nation would bother paying to be rated by these agencies? Their ratings don't matter, cuts don't effect bonds or currencies, and nobody investing in Japan's sovereign bonds is going "let's see what Moody's says about this before I pull the trigger..."

These ratings agencies better pull their heads out of the sand before they go the way of the dinosaur.

Deven Sharma just got his walking papers, so to speak, right after downgrading the U.S. It's all fun and games until the Justice Dept. comes to say "Hi."

I think that they're a big waste of time and effort - they don't provide any greater security than investing with what you know without them, and in fact, relying on their ratings leads to worse results than relying on common sense and intuition.

Boo to them. It will take a while for investment funds to change their tune and get AAA out of their charters. It will take a while to remove it from U.S. law. If congress would get off its duff and fund the Office of Credit Ratings, as the Dodd-Frank Act requires, the U.S. could lead on this issue.

I fear that the U.S. will not.

[astonas]

Re: Moody's cuts Japan's sovereign debt rating to Aa3

Can someone explain to me why a major sovereign nation would bother paying to be rated by these agencies? Their ratings don't matter, cuts don't effect bonds or currencies, and nobody investing in Japan's sovereign bonds is going "let's see what Moody's says about this before I pull the trigger..."

My understanding is that sovereign nations, unlike private borrowers, don't pay to be rated.

[dcarrigg]

Re: Moody's cuts Japan's sovereign debt rating to Aa3

My understanding is that sovereign nations, unlike private borrowers, don't pay to be rated.

That would explain it. I know that local .gov has to pay it, but if Federal .gov did not, then I suppose I get it. But if they're not getting paid to do it, why bother?

[astonas]

Re: Moody's cuts Japan's sovereign debt rating to Aa3

That would explain it. I know that local .gov has to pay it, but if Federal .gov did not, then I suppose I get it. But if they're not getting paid to do it, why bother?

I'm partially speculating here, but I believe it could be a requirement associated with the status given them by U.S. law as one of the legally established evaluators of risk. There are rules about who is allowed to invest in certain assets, and the rating agencies have been authorized to ascertain which investments fall into which category, so that both the investment advisor selling the investment, and the buyer have a source for independent judgement. They might be required by the same law to rate all significant governments as part of the overhead for being permitted to rate private issues as well.