Fitch Takes Japan Rating Down a Notch, Negative Outlook
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Shares in the Nikkei moved higher overnight despite a downgrade of its sovereign debt rating by Fitch. Japan's rating was dropped from AA to A-plus, and reflects Fitch’s concern about Japan’s rising public debt ratio. Japan's debt is expected to be 239 percent of GDP in 2012, the most in the industrialized world.
Japan's economy has struggled with deflation for decades, and the problem is further compounded by an aging population.
Efforts to balance the budget in Japan are being stifled by political strife over a tax increase, and few are optimistic Japan with have the guts to tackle its fiscal problems near term.
"The downgrades and Negative Outlooks reflect growing risks for Japan's sovereign credit profile as a result of high and rising public debt ratios," said Andrew Colquhoun, Head of Asia-Pacific Sovereigns at Fitch. "The country's fiscal consolidation plan looks leisurely relative even to other fiscally-challenged high-income countries, and implementation is subject to political risk."
Fitch's outlook on Japan is negative.
iShares MSCI Japan ETF (NYSE: EWJ) tracks the equity market in Japan. The equity market in Japan has dropped 10 percent in the past three months.
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Japan's economy has struggled with deflation for decades, and the problem is further compounded by an aging population.
Efforts to balance the budget in Japan are being stifled by political strife over a tax increase, and few are optimistic Japan with have the guts to tackle its fiscal problems near term.
"The downgrades and Negative Outlooks reflect growing risks for Japan's sovereign credit profile as a result of high and rising public debt ratios," said Andrew Colquhoun, Head of Asia-Pacific Sovereigns at Fitch. "The country's fiscal consolidation plan looks leisurely relative even to other fiscally-challenged high-income countries, and implementation is subject to political risk."
Fitch's outlook on Japan is negative.
iShares MSCI Japan ETF (NYSE: EWJ) tracks the equity market in Japan. The equity market in Japan has dropped 10 percent in the past three months.
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