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Japan Sovereign Debt Outlook Upgraded

Japan Sovereign Debt Outlook UpgradedJapan Sovereign Debt Outlook Upgraded

A Japanese rating agency raised its outlook for the country’s sovereign debt from “negative” to “stable” on Thursday, citing rising tax revenue from the robust global economy that will support state coffers.

Rating and Investment Information kept its rating on Japanese government bonds unchanged at AA+, one notch below the highest grade. But the agency upgraded the outlook because “downward pressure on the sovereign creditworthiness has eased” in light of higher tax revenues, Nikkei reported.

“The improvement in corporate performance will likely boost tax revenue” this fiscal year, R&I added, on top of record profits for Japan’s listed companies in fiscal 2017.

Yet the report cites several fiscal issues, notably how the government’s debt is 240% the size of Japan’s economy. “Any loosening of fiscal discipline warrants careful attention,” R&I said. The company also highlighted the trade tensions between the US and China as an uncertainty.

R&I had downgraded the outlook for JGBs to “negative” after the 2016 decision by Prime Minister Shinzo Abe’s government to postpone the planned increase in the national sales tax rate to 10% from 8%. The ratings agency said a downward revision was warranted absent a valid path to restoring fiscal health.

Meanwhile, Japan’s jobless rate rose slightly in July while the availability of jobs improved, government data showed on Friday.

The seasonally adjusted unemployment rate rose to 2.5% from 2.4% in July, and compared with economists’ median forecast of 2.4%, figures from the ministry of internal affairs and communications showed.

The jobs-to-applicants ratio rose to 1.63 from 1.62 in June, hitting the highest level since January 1974, separate data from the labor ministry showed. The median forecast was for 1.62.

 

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