Home / Knowledge / News / Textiles / 'Japan's A1 rating supported by fundamentals'
'Japan's A1 rating supported by fundamentals'
26
Nov '15
Moody's Investors Service says Japan's A1 issuer and senior unsecured ratings and stable outlook are supported by fundamental features that make an extraordinarily high level of government debt affordable.

But the foremost credit challenge is bolstering debt sustainability through fiscal consolidation. It is unclear how the government can reach its balanced or near balanced primary fiscal balance target by 2020 in the absence of stronger growth.

More robust economic activity will likely depend on the nature, speed of implementation, and effectiveness of structural reforms.

Moody's conclusions were contained in its just-released credit analysis "Japan, Government of", which looks at the country's credit profile in terms of Economic Strength [assessed as "High (+)"]; Institutional Strength ["Very High"]; Fiscal Strength ["High (-)"]; and Susceptibility to Event Risk ["Low (-)"].

These represent the four main analytic factors in Moody's Sovereign Bond Rating Methodology. The analysis constitutes an annual update to investors and is not a rating action.

Since Moody's downgrade of the sovereign in December 2014, Japan has emerged from one recession only to fall into another, as weakening global demand weighs on economic output. Labour markets have tightened and corporate profitability has remained robust, but neither has translated into higher wages or greater investment.

Moody's "High (+)" assessment of Japan's economic balances the economy's size, wealth, and diversity against its weak growth performance. In nominal dollar terms, the economy is the third largest in the world at $4.6 trillion in 2014, smaller than only the US (Aaa stable) and China (Aa3 stable).

But structural factors -- most prominently worsening demographics -- temper prospects for higher growth rates and will hamper the government's attempts to resolve its debt problem.

The "Very High" assessment of institutional strength reflects Japan's very strong adherence to the rule of law, effective government, and strict control of corruption.

Breaking Japan's deflationary cycle remains the key challenge for the Bank of Japan (BOJ). The central bank's inability to generate stable price growth reflects some weaknesses in Japan's policy credibility and effectiveness, which are part of Moody's assessment of institutional strength. Nevertheless, the very low volatility in inflation has kept price uncertainty to a minimum.

Moody's "High (-)" assessment for fiscal strength takes into account Japan's stabilized debt burden and improved revenue performance, both of which have enhanced debt affordability.

While Japan's debt burden as a share of GDP is higher than any other country in our rated universe, its sustainability over the rating horizon is reinforced by its favorable structure and the very low interest rates the government pays on its debt.


Must ReadView All

India's Kay Ventures aims to turn Karur into knitwear hub

Apparel/Garments | On 20th Aug 2018

India's Kay Ventures aims to turn Karur into knitwear hub

India’s Kay Ventures has teamed up with Hydra Micro Business...

Uzbekistan-China meeting discusses textile cooperation

Textiles | On 20th Aug 2018

Uzbekistan-China meeting discusses textile cooperation

A meeting of the Uzbek-Chinese business forum on cooperation in the...

Moldova wooing Indian investors in textiles, agriculture

Textiles | On 20th Aug 2018

Moldova wooing Indian investors in textiles, agriculture

Moldova is wooing Indian investors in textiles, agriculture and a few ...

Interviews View All

DK Sharma
Velocity Apparelz

We constantly communicate with employees at all levels

Top executives
Retailers

Weak rupee breeds inflation

Top executives
Textile & apparel bodies

The decision to reduce GST on MMF yarn to 12% is transformational

Harsh Shah

Fynd is the central online shopping destination for fashion, offering...

Mala Alwani

<div>Delhi-based fast fashion womenswear brand, Besiva, aims to bridge the ...

Carolin Russ

Weko, Weitmann &amp; Konrad GmbH &amp; Co KG, based in south Germany, is...

Johan Berlin
Investkonsult Sweden AB

Investkonsult Sweden AB are consultants in the nonwoven and absorbent...

Suresh Patel
Sidwin Fabric

Sidwin Fabric is a manufacturer and exporter of polypropylene textiles and ...

Mr Ambrose Chan
DSG International (Thailand) PLC

Sandeep and Sarah Shaikh Gonsalves
SS Homme

SS Homme celebrates the craft of traditional tailoring through the bespoke ...

Igor Chapurin
Chapurin

"Now we can see the Russian trend in international fashion. And Russian...

Karan Arora
Karan Arora

Bridal couture created with rich Indian heritage, exquisite craftsmanship...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

Leave your Comments


August 2018

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

news category


Related Categories:

Advanced Search