Moody’s has cut its credit rating on five Japanese commercial banks after it downgraded the country’s sovereign debt over concerns about the mammoth national debt.
The firms hit by the move were Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Trust and Banking, and Sumitomo Mitsui Banking, as well as regional lenders Shizuoka Bank and Chugoku Bank, AFP reported Tuesday.
Moody’s said it cut their rating by one notch to A1 with a stable outlook from Aa3, a day after cutting Japan’s rating. “The downgrade actions follow and are in response to Moody’s downgrade of the government of Japan’s rating to A1 with a stable outlook from Aa3,” it said in a statement.
“The rating actions reflect Moody’s view that in Japan the capacity of the government to support banks is best measured by its own debt rating of A1.
“Despite these rating actions, Moody’s considers that the willingness of the Japanese government to support major banks continues to be very high.”
The cut to Japan’s rating on Monday put it below neighbors China and South Korea, and on the same level as Israel and the Czech Republic.
The agency cited “rising uncertainty” over the country’s fiscal situation – it has one of the world’s heaviest national debt burdens – and Prime Minister Shinzo Abe’s faltering efforts to kick-start growth, with an election just two weeks away.
S&P’s Doubts
Standard & Poor’s on Tuesday cast doubt on Prime Minister Shinzo Abe’s ability to repair Japan’s tattered finances less than two weeks away from a snap election, after Moody’s downgraded the country’s sovereign debt rating.
Abe’s decision to delay a sales tax increase by 18 months may help the economy in the short term, but there is still no guarantee taxes will rise because the political dynamic could change after the election, Takahira Ogawa, director of sovereign ratings at S&P, told Reuters.
The growing reservations about Japan come at an awkward time for Abe as he has called an election on Dec. 14 that has become a vote on whether he has done enough to fundamentally improve the prospects for growth.
“I might be wrong, but judging by history I’m not optimistic about getting a detailed fiscal plan,” Ogawa said. “In addition, if the government fails to implement its plan, then it doesn’t make any sense.”
S&P has an AA- rating on Japan, which is three notches from the top rating of AAA. S&P’s rating on Japan has a negative outlook, meaning a downgrade is possible.
