Thread: FBS: S&P's lowered outlook for Japanese debt

Japanese yen weakened today versus the greenback – the USD/JPY recovered today from 81.26 getting above 82 yen per dollar. It happened as the Standard & Poor’s changed the outlook for Japan’s AA- local-currency credit rating from stable to negative. The agency explained such more by the increased risks associated with the consequences of the March earthquake and tsunami.

However, economists don’t think that S&P’s decision will have strong or long-lasting impact on the market. Analysts at Citi remind that the major part of Japanese government securities is held by domestic banks, so it’s unlikely that the news cause the nation’s debt sell-off by foreigners. In addition, when Moody's said on February 22 that Japan's Aa2 rating may be reduced yen didn’t lose much.

Analysts at Societe Generale claim that S&P’s action will force Japanese authorities to look for the ways of increasing revenue. Strategists at RBS Securities Tokyo say that taking into account the scope of the earthquake, it’s clear that the government spending will be huge. According to S&P estimates, the reconstruction after last month’s disaster will cost the country’s economy 50 trillion yen ($613 billion).



Chart. Daily USD/JPY

japan need lot of Money for recovery