A man sits near a container ship at a port in Tokyo. Japan aims to return to a primary budget surplus in fiscal 2020, and then focus on reducing its public debt burden, which is the worst in the world at around twice the size of its economy, Moody’s said yesterday.

Reuters/Tokyo

Japan’s sovereign credit rating is likely to remain in place for the next few years, supported by the low rates at which the government can fund its debt, an official at ratings agency Moody’s Investors Service said yesterday.
“When we downgraded last year, we were thinking there are uncertainties but the A1 rating should take us through for at least the next couple of years,” Christian de Guzman, a vice president of sovereign ratings at Moody’s, told Reuters.
“But we are always watching,” he added.  De Guzman said that while it may make sense for Japan’s government to increase fiscal spending if the economy needed an extra boost, the possibility that Japan could yet delay a sales tax increase scheduled for 2017 was a concern.  The ratings agency is closely monitoring whether the government remains on track to meet its target to return to a primary budget surplus in fiscal 2020, he said.
Moody’s downgraded Japan to A1 last December citing growing uncertainty over its ability to hit its debt-reduction goal. Moody’s rating for Japan is four notches below the top rating.
The outlook for Japan is stable.
In addition to a stable government debt market, stable moves in the yen are also supportive of Japan’s sovereign rating, de Guzman said.
Japan aims to return to a primary budget surplus in fiscal 2020, and then focus on reducing its public debt burden, which is the worst in the world at around twice the size of its economy.
However, the government has clearly stated it wants to focus on higher economic growth to improve public finances, and there is some concern the government could delay a sales tax hike scheduled for 2017, de Guzman said.
Another area of concern is that external demand could be weaker than the government expects due to China’s slowing economy, de Guzman said.
It is too early to determine the impact of new policies Japanese Prime Minister Shinzo Abe announced last month, because the government needs to offer more details, de Guzman said.  Abe last month tried to breathe new life into his economic agenda by saying the government will raise nominal gross domestic product by nearly a quarter to ¥600tn ($5.01tn), lift the fertility rate and improve the welfare system.