S&P affirms Japan’s credit rating at AA-

Credit-ratings agency Standard & Poor's Corp today reaffirmed Japan's sovereign debt rating at AA-, even as it cautioned that it would consider lowering its long and short-term ratings if Japanese authorities failed to alter the debt trajectory from its current course.

According to the credit-rating agency, it would monitor efforts by Tokyo to improve its fiscal position, including proposals currently being circulated for an increase in the national sales tax. According to the credit-rating agency, it would maintain its negative outlook on Japanese sovereigns, citing a weak government policy footing, fiscal deficits, persistent deflation, shrinking population and high debt.

It warned today that it could lower the sovereign rating of Japan in the event of the economy expanding less than expected or if public debt continued to grow, as the country's unpopular government struggled to win support for higher taxes.

The ratings agency affirmed its AA- rating on Japan with a negative outlook. However, it warned that higher taxes would not solve the structural problems that pushed up Japan's welfare spending and increasingly pressured state coffers.

Japan's debt burden is the heaviest among industrialised economies, and it may not be in a position to postpone drastic spending cuts and aggressive tax hikes much longer as Europe's debt crisis threatened the global economy.

A problem was that the ruling Democratic Party lacked the majority needed to get its way with the opposition in parliament, so policymaking often moved at a slow pace.