巴黎人娱乐城

巴黎人娱乐城-London-27 May 2011: 巴黎人娱乐城 has revised Japan's Outlook to Negative from Stable. Its ratings have been affirmed at Long-Term Foreign Currency Issuer Default Rating (IDR) 'AA'; Long-Term Local Currency IDR 'AA-' and Short-Term Foreign Currency IDR 'F1+'. The Country Ceiling has also been affirmed at 'AAA'.

"Japan's sovereign credit-worthiness is under negative pressure from rising government indebtedness. A stronger fiscal consolidation strategy is necessary to buffer the sustainability of the public finances against the adverse structural trend of population ageing," said Andrew Colquhoun, head of 巴黎人娱乐城's Asia-Pacific Sovereigns team.

Japan's gross government debt reached 210% of GDP by end-2010, by far the highest ratio for any 巴黎人娱乐城-rated sovereign. Japan is less of an outlier against other high-grade sovereigns on net debt measures, partly because the sovereign holds the world's second-biggest FX reserves stockpile of over USD1trn (end-2010), supporting the one-notch uplift of the Foreign Currency IDR. However, net government indebtedness is also rising sharply. The projected 56pp rise in the general government gross debt ratio from end-2007 (before the onset of the global financial crisis and recession) to end-2012 is the third-highest for any 巴黎人娱乐城-rated sovereign, behind only Ireland and Iceland, both of which have experienced systemic banking crises.

Japan's ratings remain supported by the sovereign's ongoing access to funding from the deep pool of Japanese private-sector savings. A further supportive factor is the high share of government debt held by the broader public sector (some 50% of the JGB stock), which reduces the risk of self-fulfilling panic among debt holders. However, the Japanese household savings rate has been on a downtrend since the early 1990s, which 巴黎人娱乐城 believes is a structural trend associated with population ageing. This has been partly offset by rising corporate savings, although it is not clear if corporates will be as willing as households to fund the government debt at low nominal yields over the long term.

巴黎人娱乐城 estimates an additional 2pp of GDP in government expenditure on reconstruction after the March earthquake over 2011 and 2012, which is not in itself material for the ratings. However, there is considerable downside risk for the public finances from the still-unknown cost of cleaning up the Fukushima nuclear plant, while delays in restoring power supplies could lead 巴黎人娱乐城 to revise down its 2011 growth forecast from 0.5%. There is a further risk that prolonged delays in restoring infrastructure could lead more Japanese corporates to consider relocating their activities abroad, leading to a greater permanent loss of output from the disaster, although it remains too early to gauge this effect.

巴黎人娱乐城 looks to important fiscal policy statements expected in coming months including the revised Medium-Term Fiscal Framework, proposals on tax and social security reform, and the FY12 budget. The emergence of a stronger and more credible consolidation plan backed by credible political commitment to its implementation could see the ratings revert to Stable Outlook. Failure to strengthen the commitment to fiscal consolidation, or the emergence of substantial additional fiscal or economic costs from the process of reconstruction post-disaster, could trigger a downgrade.


Contacts:

Primary Analyst
Andrew Colquhoun
Senior Director
+852 2263 9938
巴黎人娱乐城 (Hong Kong) Ltd
28th Floor, Tower Two, Lippo Centre
89 Queensway, Hong Kong

Secondary Analyst
David Riley
Group Managing Director
+44 20 3530 1175

Committee Chairman
Ed Parker
Managing Director
+44 20 3530 1176

Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com; Wai Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com.

Additional information is available at

Applicable criteria, 'Sovereign Rating Methodology', dated 16 August 2010, are available on .

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